Bounce in oil prices bolster base metals; Aluminium hits six-month peak in London

Aluminium hit a six-month peak on Wednesday as the appetite for risk increased among investors who took a more upbeat view on the Chinese economy and saw commodities as relatively cheap. Analysts attribute the buoyancy in metals markets to the bounce in oil prices.

"I think there's some restocking coming through in China based on some stability in the economy and generally we're seeing some risk appetite coming back. There's a certain warming towards commodities in general," said Robin Bhar, head of metals research at Societe Generale in London.

Three-month aluminium on the London Metal Exchange climbed 2.2 per cent to close at $US1622.50 a tonne, the strongest since October 2015.

Aluminium is the top gainer on the LME over the past month, up some 6 per cent after producers cut output, but Bhar said he was wary about further gains, partly due to expected producer forward selling above $US1600.

"I'd be very cautious that anything can be sustained, particularly because we've had news that some of the Chinese smelters that cut output in December are now restarting."

Primary aluminium output in top producer China climbed in March to 2.62 million tonnes from 2.07 million tonnes in February, data from the International Aluminium Institute (IAI) showed.

SMM Forecast:

LME aluminium will face technical correction on today, April 21, after hitting new high yesterday, ranging USD 1,610-1,640 per million tonne, SMM predicted yesterday.

SHFE 1606 aluminium will also face technical correction and move at RMB 12,200-12,300 per million tonne.

In China’s spot aluminium market, spot discounts of RMB 0-20 per million tonne and spot premiums of RMB 0-20 per million tonne are expected over SHFE 1605 aluminium contract.