Aluminum prices on the Shanghai Futures Exchange continued to soar on Thursday as investors eyed the metal as an alternative to copper.

The most active aluminum contract, for October delivery, rose about 1.4 percent to settle at 18,455 yuan ($2,860.58) per ton. The contract was up 4.9 percent since the previous Friday, far more than other base metals. For example, the most traded SHFE copper contract was up 1 percent for the week.

Aluminum fundamentals have been strong lately, which has attracted speculators betting that prices will rise, according to Tong Changzheng, an analyst at Huatai Great Wall Futures.

Over the last few months, several analysts have told the Global Times that aluminum’s fundamentals are the strongest of the SHFE-traded base metals.

Some analysts have suggested that copper prices above 70,000 yuan per ton are just too high for most buyers, especially amid the current dour global economic landscape.

The October delivery copper contract slipped about 0.2 percent on Thursday to settle at 72,710 yuan per ton, bouncing back after falling 0.6 percent when the market opened.

The benchmark three-month copper contract on the London Metal Exchange lost 0.4 percent in Wednesday’s session, before inching up on Thursday. It was trading at $9,792 per ton, up 0.1 percent when the SHFE closed.

With a limited upside for copper, investors may have turned to aluminum.

But if this is the case, it won’t be much of a trend. SHFE aluminum rapid rise this week is based on a favorable short-term supply and demand basis, said an analyst surnamed Yuan with Shanghai East Asia Futures.

“Right now, investors show a preference for a short-term imbalance between supply and demand because of the bleak economic prospects,” Yuan said.

Zinc for October delivery slipped 0.1 percent to settle at 19,010 yuan per ton. The September delivery lead contract gained about 0.5 percent to settle at 17,645 yuan per ton.

Demand for physical gold in China may exceed consumption in India by the end of this year, said Chuck Jeannes, chief executive officer of Goldcorp Inc. (G), the world’s No. 2 producer of the metal by market value.
“Three or four years ago there was no one who would have expected Chinese physical demand for gold to surpass India,” Jeannes said yesterday in a telephone interview from New York. “Now it looks like that could happen as early as the end of this year. And that’s while Indian demand is increasing.”
While global demand for gold is advancing on concerns about financial turmoil in the U.S. and some European countries, consumers in China are buying larger amounts of the metal as an inflation hedge, Jeannes said.
Investment demand in China more than doubled in the first quarter to 90.9 metric tons as the nation overtook India to become the largest market for coins and bars, the World Gold Council said in May.

India was the largest consumer of gold jewelry last year, according to data compiled by Bloomberg. Gold reached a record $1,631.20 an ounce on July 27 in New York on concern about a potential U.S. default and is heading for an 11th straight annual increase.
Demand for gold in both China and India may help lift the price of the precious metal, said Jeannes, who said he expects gold to advance to $1,700 an ounce by the end of the year.
“I predicted a $1,600 gold price at the beginning of the year, and am happy to see it there now,” Jeannes said. “I wouldn’t be surprised to see it move significantly higher by the end of the year.”
Goldcorp, based in Vancouver, is second by market value after Toronto-based Barrick Gold Corp., the world’s largest gold producer.

Japan’s output of rolled copper products rose 2.4% in May from April as strong demand for environmentally friendly air conditioners offset weakness in chips and cars.

The Japan Copper and Brass Association said that rolled copper output totalled 72,328 tonnes in May on a seasonally adjusted basis nearly flat from a year earlier.

An industry official said that output has been almost flat on a year-on-year basis since March, meaning the magnitude 9.0 earthquake during the month has not had a big impact on Japan’s rolled copper output. But it is clear that air conditioner makers are ramping up output ahead of the peak demand season which helped offset soft demand from the semiconductor and auto sectors.

Demand for copper, used in a wide range of items including construction materials, computer chips and car parts is often seen as a measure of economic activity.

The Japan Electric Wire and Cable Makers’ Association said last week that cable copper wire and cable shipments in May inched up from a year earlier to 51,200 tonnes. That was the first YoY rise in three months but the third lowest level for the month of May in 35 years as exports declined in the wake of a slowdown in the Chinese economy.

Japanese manufacturers have been recovering from the effects of the March 11 earthquake and tsunami, making progress in restoring production and supply chains wrecked by the disaster.

The government last week upgraded its view of the economy’s performance and outlook for the first time in 4 months following the previous week’s upgrade in the Bank of Japan’s view of the economy. But a slowdown of the global economy, particularly China, the world’s biggest consumer of copper and Japan’s biggest export market is a worrying sign.

Japan’s refined copper exports plunged 52 percent in May from a year earlier to 23,764 tonnes for an eighth straight month of year-on-year declines, Ministry of Finance data showed on Wednesday, reflecting slowing demand
from China, the world’s top copper consumer.

But exports inched up 0.8 percent from April, with China’s share also improving to 36 percent in May from 29 percent in April.

China accounted for 48.5 percent of Japanese refined copper exports in March.

China’s imports of refined copper fell 6.9 percent in May to a 30-month low after falling 16.6 percent in April on ample domestic stocks and a slowdown in demand.

Taiwan accounted for 32 percent of Japan’s exports in May, steady from April. Indonesia and Thailand are also key markets for Japan’s copper.

Demand for copper, used in utensils, construction materials and computer chips, is often seen as a gauge of economic activity.

As Japanese manufacturers began recovering from production disruptions after the massive March 11 earthquake, Japan’s output of rolled copper products rose 2.4 percent in May from April, helped by strong demand for environmentally friendly air conditioners, which offset weakness in chips and cars.

Brazil and China are heading for a battle of strategic necessity over copper in Africa that will leave the winner walking away with the most expensive acquisition of a diversified minerals company.

Jinchuan Group, the biggest Chinese nickel producer, is considering a bid for Johannesburg-based Metorex Ltd. (MTX) to rival Vale SA (VALE5)’s offer, two people familiar with the deal said yesterday. Metorex is trading 6.1 percent above Rio de Janeiro- based Vale’s proposal of 7.35 rand a share, the most of any pending deal in Africa, making it the likeliest to garner a higher price tag, according to data compiled by Bloomberg. (more…)

Weak outlook of Euro zone due to ongoing tensions of Greece bailout, demand declines in China took Indian metals markets on a ride.

Most of the base metals went for a toss since the opening quotes even after closure of London Metal Exchange (LME). Technical selling persisted in the metals after a sober run last week.

Indian Copper futures witnessed shorting that took prices towards Rs 413.5 per kg, the prices are now at Rs 414.8 per kg. Nickel was down by 1.2% to trade at Rs 1040 per kg. Meanwhile, Lead slumped to Rs 114 per kg, down 0.7%.

Elsewhere, China lead battery plants in Zhejiang, Guangdong, Fujian, Henan and Sichuan had been closed down following a central government order to root out heavy metal pollution problems in the sector. Lead is extensively used in mobile phones and e bikes in China.

Both of which compounded account for more than 70% of the lead demand. With closure of the battery-manufacturing units the demand is expected to slow down.

In Europe, Greece has already failed to gain a vote for austerity measures and was on a verge of bankruptcy eagerly awaiting IMF and Euro zone relief measures.

Jobs data remained quite dismal in US. For the week ending May 21, an increase of 10000 was registered from the previous week’s revised figure of 414000. Overall the situation for world economics has plenty of if’s and but’s to answer.

Dollar gained against the EURO on Monday with pair exchanging hands at 1.4285 against 1.4321 last week.

The Sudbury Star reported that nickel prices may be moving down world markets, but they will stay high enough for Vale and Xstrata to keep producing in Sudbury.

Mr Kerry Smith analyst at Haywood Securities said that “I’m thinking US USD 9 to USD 11 a pound for the medium term or the next one to three years. Right now, it’s between USD 10.50 and USD 10.60 a pound. I’m thinking it’s going to be in this range. In the next few months, I think it’s going to be USD 10 to USD 11. I can’t see it going higher or lower. I think Vale and Xstrata Nickel can make decent money at these prices.”

Mr Smith said while a lot of new nickel production is coming on stream involving laterite nickel ores to be processed with new acid leaching technology, it won’t all be coming into play at once. He doesn’t see the laterite nickel ores (meaning ore located close to the surface) having much impact on world nickel supply and demand.

He said that “I don’t know if they will work as good as expected. There’s a lot of new production coming into the market from Vale and Xstrata. They have big balance sheets. They can get their projects to work. I think nickel is going to do well, but I don’t think we’re going to get back to the price we had in 2003: USD 25 a pound.”

One aspect of the world nickel market, China’s expansion and refinement using nickel pig iron for internal consumption has Mr Smith concerned about what could happen to the world nickel market as a whole.

While Chinese producers of nickel pig iron, a nickel substitute, had a production cost of about $15 a pound when they started several years ago, efficiencies introduced since then may have cut costs by about half.

Dr Jean Charles Cachon, a commerce and administration professor at Laurentian University agreed that world nickel prices won’t move much in the year ahead.

He said that after nickel hit USD 25 a pound in July 2007, one of the world’s big nickel consumers China took such measures as stockpiling nickel and getting into nickel pig iron to ensure its growing economy would never get burned again by rampant speculation.

Mr Cachon said look for a nickel price in the USD 9 to USD 11 range for some time.

In Greater Sudbury, Vale’s No 2 flash furnace at its Copper Cliff Smelter is down due to a 16 week rebuild that is now underway. The expected loss of nickel production will be about 5% of Vale’s 2011 nickel output or about 15,000 tonnes.

Ms Angie Robson, a spokeswoman with Vale in Greater Sudbury, said that Vale doesn’t talk about nickel prices and where they are heading. She added that “We are making tremendous investments over the next few years to make our operations more efficient. We will be spending USD 3.4 billion between now and 2014.”

China’s Ministry of Environmental Protection has ordered East Hope Group’s alumina refinery in Henan province to shut down production facilities that had not been approved.

The ministry said East Hope (Sanmenxia) Aluminium, the alumina arm of the large aluminium and agricultural products group in China, had been given approval to build annual capacity of 700,000 tonnes in two phases in Sanmenxia city in the central province. But the refinery had built extra 400,000 tonnes of capacity without an additional approval, according to a statement posted on the ministry website on Thursday.

The refinery also had added another two phases in the construction of alumina capacity and four power generators that all had not been approved by the ministry, the statement said.

The ministry ruled that East Hope (Sanmenxia) had to shut down units with 400,000 tonnes capacity and the added two phases of alumina production capacity. The refinery was also fined 100,000 yuan, said the statement dated May 23.

The statement did not disclose the total capacity involved and the timeframe of closure.

East Hope Group’s metal arm operates the alumina refinery in Henan and an aluminium smelter in Inner Mongolia in the north.

The group’s website does not provide capacity of the alumina and aluminium plants.

Industry sources estimate East Hope’s alumina refinery has more than 2 million tonnes of annual capacity and the aluminium smelter has about 1 million tonnes.

China, the world’s top consumer of alumina used to produce primary aluminium, has more than 41 million tonnes per year of alumina capacity.

Zhongjin Gold’s controlling shareholder plans to pay 2.34 billion yuan on a two-year project to expand production scale in Shandong province, reports Xinmin Evening News, citing a company filing.

The project is expected to produce 1,235 kilograms of gold each year, generating 294 million yuan in revenues.