Aluminium slips as global factory growth stalls blunting demand hopes

Global manufacturing growth slowed down last month putting a downward pressure on commodity prices, a survey showed.

In China, factory activity shrank for a 14th consecutive month in April, a survey showed, presenting a mixed picture of the health of the world's No. 2 economy.

Aluminium gave up some of its gains from April. Shanghai aluminium fell 1.7 per cent, after last month's more than 7 per cent rise, while LME aluminium fell 1 per cent, following a sharp 10 per cent monthly rally.

The recent spike in prices is prompting aluminium producers to restart their plants, Standard Chartered said in a note, adding that 1.7 million tonnes per year of capacity had already been restarted year to date.

"Given current SHFE prices support nearly 90 per cent of China's smelters in profit, further restarts seem likely and should weigh on prices," the bank added.

As of now, a stronger dollar is weighing on demand for commodities priced in the greenback. The dollar came off 15-month lows against a basket of currencies reached on Tuesday to hit its highest in three sessions, eroding the purchasing power of buyers paying with other currencies.

In the end user segment, Detroit automakers reported another month of strong demand from U.S. consumers for trucks and sport utility vehicles. Automakers are a key user of aluminium, and the metal's consumption in the industry is currently on the rise following enhanced awareness about greenhouse gas reduction which is intricately related to lightweighting of vehicles globally.