Aluminium prices fall on China PMI

Prices of aluminium fell to a month low on May 1st; following the disappointing data on the factory activity in China’s top consumer after central bank of U.S withdrew their monetary stimulus.

Prices fell after the data showed that there was a marginal increase in the activity of China’s factories in month of April but the government survey showed a sharp decrease in exports. This added to the concerns that economic growth may again slow after the first quarter’s slowdown.

Three- month aluminium on LME closed 0.8% lower at $1,785 per ton. Earlier there was a drop in the price of the metal to the lowest at $1,779.

After the Federal Reserve announced the cut down in the huge bond-buying stimulus, more liquidity was taken away from the markets.

"There's less liquidity with the FOMC decision to taper more, plus the China PMI not bouncing more than expected is casting a bit of a shadow over the markets on a quiet trading day," analyst Robin Bhar at Societe Generale said.

Volumes were low while many European and Chinese markets were closed on May 1 for Labour Day holidays. China will also closed on Friday again and LME on Monday.

"China (investors) would normally be dip buyers. With them being out, maybe specs will just probe the lows and see if they can set off any stops," Bhar added.

Aluminium has dropped 6% since touching a peak of $1,902.50 on April 11, considered the highest in over 5 months.

"The fundamentals of the market look uninspiring. Although some 1.3 million tons of output have been taken off since 2013, we have yet to see the effects in the data," INTL FCStone analyst Edward Meir said in a note.

"In China, Chalco was the latest producer to announce a cutback, but Chinese production nevertheless rose by 10.2 percent in the first quarter."