Aluminium hits six-year low after China devalues yuan

Aluminium on London Metal Exchange (LME) hit six-year lows after China devalued its currency, fuelling worries about oversupply and boosting cost of the commodity for the world's top metals consumer.

"The devaluation will make commodities more expensive for China to import, so I would imagine that is the main reason for the negative reaction," said Caroline Bain, senior commodities economist at Capital Economics in London. The devaluation also makes exports more competitive, which may eventually increase industrial production and demand for metals, Bain added. "We're not too worried because ultimately it could be a factor in a pick-up in activity in the second half of the year. It could be positive for commodities in the medium term even if the initial reaction is negative."

Aluminium ended 1.9 percent lower at $1,587 a tonne after touching $1,573.50, the lowest since July 2009. The metal used in packaging and transport has been pressured by heavy exports from China and the devaluation has the potential to increase the viability of further shipments, adding to global glut.

China devalued its currency after a run of poor economic data, a move it billed as a free-market reform but which some suspect could be the beginning of a longer slide in the exchange rate.