November 3, 2015 / 8:00 AM / 5 years ago

METALS-Copper prices drop, aluminium climbs on Alcoa cut

* Recent stronger China copper demand unlikely to last -sources

* Aluminium gains on Alcoa production cuts (Recasts on falling copper price, updates prices)

By James Regan

SYDNEY, Nov 3 (Reuters) - London copper edged down on Tuesday on festering worries over demand in top metals consumer China, but aluminium prices gained as U.S. producing giant Alcoa Inc cut output to attack a supply glut.

Stronger Chinese appetite for copper in recent weeks is unlikely to last, according to industry sources and a delve into data.

The Caixin/Markit China Manufacturing Purchasing Managers’ Index (PMI) for October came in at 48.3 on Monday, showing factory activity shrinking for the eighth consecutive month. However, the export component rose to 50.7, the first expansion since June.

“We saw some contraction in copper later in the day as sentiment again turned down on copper’s prospects,” said a metals trader in Sydney.

Three-month London Metals Exchange copper stood $5 lower at $5,120 a tonne at 0700 GMT versus Monday’s 0.3-percent gain. It had edged up earlier in the day.

Shanghai Futures Exchange copper ended 0.26 percent lower at 38,510 yuan ($6,078).

Alcoa said it would idle three of its four active U.S. aluminum smelters, slashing annual capacity by 500,000 tonnes - the steepest cuts yet by an aluminum producer to battle oversupply.

Three-month aluminium stood at $1,507 a tonne, up $15 on Monday’s close and further from last week’s six-year low of $1,492.

Recent price weakness in aluminium has been driven by concerns about slowing Chinese demand and an inadequate level of output cuts so far to address global oversupply despite forecasts for stronger appetite.

“We expect demand to rise by more than 5 percent over the whole of 2015, fueled by substitution in the automotive and power sectors,” Capital Economics said in a research note.

Nevertheless, we forecast that the market will be in surplus in 2015 before supply cuts and good demand growth tighten the market in 2016,” it said.

PRICES

Three month LME copper

Most active ShFE copper

Three month LME aluminium

Most active ShFE aluminium

Three month LME zinc

Most active ShFE zinc

Three month LME lead

Most active ShFE lead

Three month LME nickel

Most active ShFE nickel

Three month LME tin

Most active ShFE tin ($1 = 6.3355 Chinese yuan renminbi) (Editing by Joseph Radford)

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