Aluminium down on caution over output cuts, firm dollar

Aluminium fell on Thursday on disappointment over the scope of production cutbacks in China while a firmer dollar also weighed on the industrial metals market.

Chinese aluminium producers look to combat a slump in local prices to record lows; but analysts said much more was needed to curb an over supplied market that has led to global inventories surging to record highs.

"There may be some capacity cuts in China, but it's all a bit meaningless. We think there was somewhere between 1.6 and 2.5 million tonnes of new capacity commissioned this quarter," said an analyst at Citigroup in London.

"There may be production cuts at some smelters, but they're ramping up elsewhere, so overall they're not cutting production, There seems to be a lot of sleight of hand," he said.

Three-month aluminium on the London Metal Exchange had shed 0.6 percent to $1,481 a tonne by 1034 GMT.

Hopes in China that Beijing may cut export tax tariffs on aluminium to help ease a domestic glut have exacerbated dumping concerns in the United States after China exported a near record amount of semi-manufactured aluminium in November.

China said on Wednesday it will cut export taxes on steel billet and pig iron from the start of 2016 to combat a domestic glut and offer a lifeline to the stricken industry.

Most other metals were also down, pressured by a stronger dollar index, which make commodities priced in the US currency more expensive to buyers outside the United States.

Traders noted low volumes, suggesting markets were still in wait-and-see mode. Still, with positions across the metals space heavily short, traders are on alert for a short-covering rally.