October 5, 2018 / 10:59 AM / 2 months ago

METALS-Aluminium tumbles from 16-week highs

(Updates with closing prices)

By Peter Hobson

LONDON, Oct 5 (Reuters) - Aluminium prices slipped on Friday from a 16-week high reached in the previous session as investors began to question whether a plant producing the raw material alumina would close.

Copper, lead and zinc also fell sharply as industrial metals were caught up in a wider sell-off of U.S. and European equities.

"This macroeconomic fog is hindering any further advances and putting a cap on metals prices," said Societe Generale analyst Robin Bhar.

ALUMINIUM: Benchmark aluminium on the London Metal Exchange (LME) closed down 1.8 percent at $2,130 a tonne after reaching $2,267, the highest since June, on Thursday. It was still up around 3.3 percent this week.

ALUMINA: Analysts were unsure how long a shutdown would last at Norsk Hydro's Alunorte alumina refinery, the world's largest, after the Brazilian state of Para said it had been surprised by the closure and asked for an explanation.

"There is growing noise in the market ... that the decision to fully shut operations was a tactic to put pressure on authorities, who up until now had restricted production to just 50 percent of capacity," ING analysts said in a note.

Alumina is a raw material used to make aluminium.

TECHNICALS: Aluminium had fallen back below its 200-day moving average at $2,163 and a Fibonacci level at $2,173, worsening its technical picture.

CHINESE MARKETS: Markets in China, the largest metals producer and consumer, are shut this week for the National Day holiday.

STOCKS: Lower inventories still signal a tightening market, with aluminium stocks in LME-certified warehouses slipping to 966,900 tonnes, the lowest since 2008, and ShFE warehouses holding 832,256 tonnes, down from just under 1 million tonnes in May. MALSTX-TOTAL AL-STX-SGH

SPREAD: Another signal of less abundant supply is a narrowing of the discount of cash aluminium over the three-month contract to $2.50 from almost $40 a month ago. MAL0-3

PRICE OUTLOOK: Signals pointing to potential shortages across industrial metals have been submerged by uncertainty about how demand will be hit by trade wars, rising U.S. interest rates and a slowdown in China.

"The fundamental data, which are being largely ignored at present, justify higher prices (for metals)," analysts at Commerzbank said in a note.

The LME's index of six industrial metals is down around 13 percent from the June high.

OTHER METALS: LME copper ended down 1.9 percent at $6,173 a tonne, zinc finished 0.7 percent lower at $2,635, lead fell 0.5 percent to $1,997 and tin closed unchanged at $18,975.

Nickel bucked the trend, closing 1 percent higher at $12,620 a tonne.

Additional reporting by Melanie Burton editing by Louise Heavens, Elaine Hardcastle and Kirsten Donovan

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