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Aluminium pulls back on concern about Chinese construction demand

Aluminium and copper prices slipped on Wednesday on worries about declining demand after data from top metals consumer China highlighted a weak construction sector.

Three-month aluminium on the London Metal Exchange dropped 0.8% to $2,470 a tonne by 1040 GMT.

China’s factory-gate inflation eased to a 17-month low in July, data showed on Wednesday, as a slower domestic construction sector weighed on raw material demand.

The construction sector is a key demand driver for both copper and aluminium.

LME copper CMCU3 dipped 0.1% to $7,975.50 a tonne after earlier easing to $7,889.

“That was the initial reason for the weakness in the market overnight, but the market seems to be getting a little more resilient to this kind of news,” said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.

“In the short-term, we still have recession fears, what is going on in China and geo-political risks. That has just taken the temperature out of the investment appetite over the past few months.”

Traders were nervous ahead of U.S. consumer inflation numbers due at 1230 GMT, likely to show that July prices rose at an 8.7% annual pace, according a Reuters poll, which would be a small downward correction from June’s whopping 9.1%.

Even if the data comes in softer than expected, the U.S. Federal Reserve is expected to hike interest rates in its September meeting, continuing a campaign to bring down inflation which some investors fear could spur a recession.

The most-traded copper contract on the Shanghai Futures Exchange, September SCFcv1, dipped 0.3% to 61,040 yuan ($9,031.99) a tonne.

The premium of cash LME zinc over the three month contract rose CMZN0-3 to $127 a tonne, the highest since late June, indicating tightness in near term LME supplies as investors worry that high energy prices will force smelters to curb output.

Benchmark LME zinc CMZN3 was the top gainer, rising 1% to $3,570 a tonne, the highest since June 22.

LME nickel CMNI3 eased 0.6% to $21,430 a tonne, tin CMSN3 declined 0.5 to $24,300, but lead CMPB3 nudged up 0.4% to $2,174.
Source: Reuters (Reporting by Eric Onstad; Editing by Shailesh Kuber)

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