Aluminium jumps 8.5% to $2,730 after China cancels export tax rebates

Aluminium prices surged on Friday after China said it would cancel export tax rebates, fuelling worries that a heavy flow of shipments abroad may be curbed. 

Three-month aluminium on the London Metal Exchange soared as much as 8.5% to $2,730 a metric ton and was up 6.1% at $2,670 in official open-outcry trading. 

At its peak on Friday, the lightweight metal came within spitting distance of a five-month high of $2,732 hit last week on supply disruptions of bauxite and alumina, the raw materials to make primary aluminium. 

China's finance ministry said on Friday it would cancel export tax rebates for aluminium and copper products, effective Dec. 1.

"If you're not awarding rebates then more metal remains domestically in China and it could tighten the market in the rest of the world," said Nitesh Shah, commodity strategist at WisdomTree. 

Last month, Chinese exports of unwrought aluminium and products climbed 31.1% year-on-year to 577,000 tons, while they have gained 16.9% year to date. 

Copper gained 2% to $9,165.50 a ton after hitting a three-month low on Thursday. 

Also supporting copper was data showing that copper inventories in warehouses monitored by the Shanghai Futures Exchange fell 6.6% from last Friday. 

Base metals were already firmer ahead of the Chinese announcement, getting a boost from a weaker dollar index, making commodities priced in the U.S. currency less expensive for buyers using other currencies. 

Despite the gains, a host of uncertainties could still weigh on the market, Shah said. 

"China seems to want to wait for confirmation of many things before they really bring out the stimulus bazooka and the problem is the market was already expecting the bazooka." Data on Friday showed that China's factory output growth slowed in October and it was still too early to call a turn in the crisis-hit property sector, keeping alive calls for Beijing to top up its recent blitz of stimulus. 

LME nickel rose 0.8% to $15,750 a ton, zinc climbed 1.7% to $2,991, lead added 0.7% to $1,974 and tin firmed 1.6% to $29,390.