The most-traded August aluminium contract price on the SHFE dropped to 14,720 yuan ($2,298) per tonne as at 11.14am Shanghai time, down 170 yuan per tonne or 1.1% from Tuesday’s close.
China’s total social financing growth, a broad measure of credit and liquidity in the economy, declined to 760.8 billion yuan in May, less than half of the gain recorded in the preceding month. It was also the lowest reading in 22 months.
“Social financing plummeted in May, which indicates that the entire economy will continue to face capital pressure,” Guotai Junan Futures said on Wednesday.
The news reignited fears of a possible slowdown in the world’s second-largest economy due to country’s monetary tightening measures, which have been employed to curb credit risk.
Aluminium prices have come under additional pressure from weakening raw materials prices and rising production volumes in China.
Metal Bulletin assessed Chinese alumina prices at 2,800-2,900 yuan per tonne on June 7, down from 2,900-3,000 yuan per tonne a week earlier. Prices had been as high as 3,100-3,200 yuan per tonne on April 26.
After winter capacity cuts came to an end in the middle of March, Chinese aluminium production rose quickly with April seeing a total of 2.77 million tonnes of aluminium produced, an increase of 1.1% year on year, according to the country’s Bureau of Statistics.
In the first four months of 2018, China produced a total of 10.89 million tonnes of primary aluminium, up 0.2% from same period last year.
This combined with the weakness in raw materials prices was enough to offset the positive sentiment derived from declines in aluminium stocks at SHFE and London Metal Exchange warehouses.
SHFE aluminium stocks fell 5,883 tonnes to 966,824 tonnes as of June 8, while inventories on the LME dipped by 6,325 tonnes to 1,162,650 tonnes on Tuesday.
SHFE zinc prices also fell during Asian morning trading on Tuesday, with large inflows from bonded warehouses significantly easing concerns of supply tightness in the Chinese domestic market. Meanwhile, sluggish demand in the spot market also weighed on prices.
The SHFE August zinc contract price declined 340 yuan per tonne to 24,210 yuan per tonne as at 11.14am Shanghai time
Zinc stocks in Shanghai-bonded warehouses dropped to 206,000-207,000 tonnes at the end of May, compared with 214,000-215,000 tonnes a month ago, according to Metal Bulletin’s assessment.
The decline reflected an opening of the import arbitrage window since May 23, which allowed importers to achieve a better profit on selling imported metal into China, market sources told Metal Bulletin.
“Zinc ingots from bonded warehouses have been flowing into domestic market quickly,” Citic Futures Research noted.
“Spot demand has been weak, which may subdue the zinc price rally seen in previous weeks,” Guotai Junan Futures said.
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