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Base metals fall on weak yuan, LME aluminium discount widens

Most nonferrous metals fell on Tuesday as a weaker yuan reduced the purchasing power of Chinese buyers, while high inventories and weak demand pressured aluminium prices.

Three-month copper on the London Metal Exchange (LME) CMCU3 fell 1.3% to $9,773 per metric ton by 0806 GMT, while the most-traded July copper contract on the Shanghai Futures Exchange (SHFE) SCFcv1 dropped 2.3% to 79,870 yuan ($11,010.17) a ton.

China’s yuan fell against the U.S. dollar to its lowest in nearly seven months, as investors returned from a long weekend break to play catch-up with broad greenback strength in overseas markets.

The LME cash copper contract on Monday traded at a $133.14-a-ton discount to the three-month contract, the biggest discount since May 8, indicating that there was no tightness in nearby supply.

LME aluminium CMAL3 eased 0.9%to $2,549.50 a ton, zinc CMZN3 fell 2% to $2,793.50, lead CMPB3 dropped 1.2% to $2,180, tin CMSN3 edged down 0.1% at$31,965, and nickelCMNI3 declined 0.1% to $17,875.

The discount of the LME cash aluminium contract to the three-month contract CMAL0-3 widened to $62.44 a ton, the biggest discount since August 2007, after inventories more than doubled in just a month to 1.1 million tons.

“It’s a combination of the Rusal deliveries, weak physical demand due to high prices and most probably a pickup in shorts since prices fell recently,” said a trader, referring to Russian aluminium flows into LME warehouses in recent months on lucrative rent deals.

However, the share of Russian-origin aluminium has dropped lately, while the share of Indian origin has risen.

SHFE aluminium SAFcv1 shed 1.9% to 20,905 yuan a ton, nickel SNIcv1 dropped 2.4% to 139,610yuan, zinc SZNcv1 declined 2.1% to 23,695 yuan, lead SPBcv1 fell 1% to 18,705 yuan and tin SSNcv1 lost 0.9% to 264,050yuan.
Source: Reuters (Reporting by Mai Nguyen in Hanoi; Editing by Eileen Soreng and Subhranshu Sahu)

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