Aluminium hits 4-1/2 month high after China cuts bank reserve ratio

Aluminium hit a 4-1/2 month high on Monday after top metals consumer China cut its reserve ratio for banks in an effort to revive flagging growth. Investors welcomed the move by China's central bank to reduce the amount of cash that banks must hold as reserves for the fifth time since February last year.

"Any sense of proactive policymaking in China towards stabilising the economy and the exchange rate will be taken positively by commodity markets," said Nicholas Snowdon, metals analyst at Standard Chartered in London.

Three-month aluminium on the London Metal Exchange gained 0.8 percent to close at $1,573 a tonne after touching $1,589, its highest since October 15. The premium for LME cash aluminium over the benchmark three-month contract CMAL0-3 jumped to $18 a tonne, the strongest since April 2015, indicating tight near-term supply.

Some big aluminium producers are seeking an increase in surcharges of 14-18 percent for physical delivery to Japanese buyers for April-June primary metal shipments, sources said. LME prices were dampened during Asian trading by a retreat by Chinese equities, with sentiment also hit by this weekend's failure of the G20 group of leading economies to come up with concrete measures to boost growth.

Investors worried about the risk of a new global recession are hoping that data over the coming week will show that some momentum remains in the world economy, eight years into its slow recovery from the financial crisis. Metals markets await with interest the Chinese industrial production figures due for release on Tuesday and the U.S. non-farm payrolls on Friday.