February 1, 2019 / 11:11 AM / in 5 months

METALS-Aluminium drops on Hongqiao restarts; weak Chinese data weighs

(Updates with closing prices)

By Eric Onstad

LONDON, Feb 1 (Reuters) - Aluminium prices dropped on Friday, pressured by concern over excess supply after the top producer said it would resume some output, while some base metals were weighed down by weak Chinese factory data.

Other metals climbed, however, with zinc hitting its highest level in nearly seven months.

China Hongqiao Group, the world’s top aluminium smelter, said it would gradually restart production after the expiration of some government-mandated output curbs.

“We haven’t seen significant production cuts this year and we’ve been expecting to see additional supply after the expiration of the limited cutbacks,” said Ross Strachan, senior commodities economist at Capital Economics.

“There is also new capacity coming on stream both within China and elsewhere in the world, particularly a very large expansion in Bahrain.”

Benchmark aluminium on the London Metal Exchange shed 1.4 percent to $1,883 a tonne in closing open outcry trading, down 2 percent on the week.

* CHINA PMI: China’s factory activity shrank by the most in almost three years in January as new orders slumped further and output fell, a private survey showed, reinforcing fears that a slowdown in the world’s second-largest economy is deepening.

“Generally we’re confident that there will be significantly slower growth over the next six months. You’ve got the weakest credit growth in China for a decade and that does tend to lead to weak demand, so that’s why we see further downside in almost all the industrial metals,” Strachan said.

* COPPER: Three-month LME copper slipped 0.5 percent to end at $6,139 a tonne, having hit a seven-week high in the previous session. The metal, widely used in manufacturing and construction, gained 1.3 percent this week.

* CHILEAN COPPER: Top copper miner Codelco said it had struck a contract deal with the union of supervisors at its Gabriela Mistral mine in northern Chile, averting the threat of a strike.

* TRADE TALKS: U.S. President Donald Trump said he would meet China’s Xi Jinping soon to try to seal a comprehensive trade deal, citing substantial progress.

* ZINC/NICKEL: Zinc and nickel firmed after prices of steel raw materials in China climbed to multi-month peaks on Friday, buoyed by supply disruption issues.

LME zinc, mainly used to galvanise steel, climbed 2.2 percent to finish at $2,777 a tonne, its highest since July 4, amid tight LME inventories. LME stocks have more than halved over the past five months.

Nickel, largely used for making stainless steel, gained 1.4 percent to $12,660, its highest since Oct. 22.

* OTHER METALS: Lead rose 0.7 percent to close at $2,127 a tonne while tin added 0.2 percent to $20,890.

* For the top stories in metals and other news, click or (Additional reporting by Muyu Xu and Tom Daly in Beijing; Editing by Susan Fenton and David Goodman)

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