LONDON, Oct 8 (Reuters) – Aluminium prices fell to one-week lows on Monday as worries about supplies receded after a Brazilian court approved emergency waste measures that could allow the world’s biggest alumina refinery to resume production. Last week, Norsk Hydro was granted a permit in Brazil to use new technology to extend the life of a disposal area for its Alunorte alumina refinery which would mean the restart of 50 percent of production of alumina, a feedstock for aluminium. Benchmark aluminium on the London Metal Exchange was down 2.5 percent at $2,077 a tonne by 0917 GMT from an earlier $2,044.50, its lowest since Sept. 28. It is down about 9 percent since hitting a 3-1/2-month peak at $2,267 on Thursday. “Gains have reversed, the Alunorte news means no imminent tightening of the aluminium market from upstream supply disruptions and no further cost inflation on the alumina side,” said Julius Baer analyst Carsten Menke. ALUMINIUM STOCKS: Inventories of the metal used widely in transport and packaging in LME approved warehouses at 963,350 tonnes have more than halved since January 2017, creating nervousness about nearby supplies on the LME market. Cancelled warrants — metal earmarked for delivery and so no longer available to the market — at nearly 37 percent have also reinforced concerns about a tight LME market. This is one reason why the discount for the cash over the three-month contract has narrowed to around $2 a tonne from near $40 a tonne in early September.
TECHNICALS: Aluminium is struggling to hold above $2,075 a tonne, where the 21- and 55-day moving averages are converging.
CHINA: Concerns about economic and demand growth in China were fuelled by the country’s central bank slashing the level of cash that banks must hold as reserves, stepping up moves to lower financing costs and spur growth.
Beijing has stepped up liquidity support across the financial system this year to calm fears of capital outflows and the damage to China’s economy from a heated trade war with the United States.
COPPER STOCKS: Sliding stocks of copper on the LME market are also a cause for concern, traders said. At 181,975 tonnes, they have more than halved since late March, while cancelled warrants have climbed above 50 percent.
DOLLAR: The higher U.S. currency was weighing on industrial metal prices generally, as it makes dollar-priced commodities more expensive for holders of other currencies, potentially subduing demand.