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METALS-Aluminium flat as investors reassess China capacity cuts

* LME/ShFE arb: http://tmsnrt.rs/2oQ5nm2 (Adds comment, details, updates prices)

LONDON, July 14 (Reuters) - Aluminum traded flat on Friday after marking its biggest one day increase in nearly three months in the prior session, as investors reassessed concerns over capacity cuts in top producer China.

An industry association said last month China will launch a crackdown to curb the illegal expansion of aluminum capacity and Chinese media on Thursday reported significant capacity shutdowns were in the pipeline.

But offsetting these closures, later reports indicated new capacity was coming on stream at the same time.

"The China story is priced in. They're (also) bringing new capacity online which is more efficient. We don't expect to see the aluminum market rally significantly from these levels. We have it averaging $1,950 in the fourth quarter," said Warren Patterson, Commodities Strategist at ING.

* ALUMINIUM PRICES: Three-month London Meta Exchange aluminum traded flat at $1,923.50 at 1012 GMT, having gained 1.7 percent in the previous session.

"While production may be reduced in China, it is being expanded elsewhere. In the U.S. for example, a smelter with a capacity of a good 160,000 tons per annum looks set to go back into operation next year," Commerzbank said in a note.

COPPER: LME copper traded flat at $5,874.50 a tonne, underpinned by encouraging economic reports from China.

CHINA FISCAL SPENDING: China's fiscal spending jumped 19.1 percent in June from a year earlier, quickening sharply from a 9.2 percent rise in May and signaling government efforts to cushion a gradual slowdown in the economy.

CHINA TRADE: China posted stronger-than-expected June trade figures on Thursday, bolstered by firm global demand for Chinese goods and a robust appetite for construction materials at home, but local lending curbs could weigh on imports later this year.

COPPER TECHNICALS: Copper prices have failed at the $5,930-$5,970 band five times in the past two weeks, reflecting formidable chart-based resistance at this level. Support is seen at the 100-day moving average at $5,761 a tonne.

* COPPER SUPPLY: Workers at the Zaldivar copper mine in Chile, owned by Antofagasta Plc and Barrick Gold Corp , will resume talks with Antofagasta after voting to strike earlier this week, the union said on Thursday.

* OTHER METALS: Zinc fell 1.5 percent to $2,760 a tonne as warehouse inventories monitored by the Shanghai Futures Exchange jumped 16.2 percent from last Friday to 77,786 tonnes.

* U.S. ECONOMY: The number of Americans filing for unemployment benefit fell last week for the first time in a month and producer prices unexpectedly rose in June, likely keeping the Federal Reserve on course for a third interest rate increase this year.

(Additional reporting by Melanie Burton, editing by David Evans)