Aluminium prices have hit two-month highs before retreating on profit-taking as the spotlight returns to oversupply and expectations of rising output in China.
Benchmark aluminium ended down 0.7 per cent at $US1,679 a tonne. The metal used in transport and packaging had earlier touched $US1,693, it highest since August 18.
Traders said that aluminium had, in large part, been boosted by funds that use trend-based models but that producer selling as prices approached $US1,700 and offers at $US1,695 had triggered the reversal.
Top producer China accounts for more than half of global output estimated this year at about 59 million tonnes. Its producers have been ramping up capacity this year, increasing expectations of a jump in output in the fourth quarter.
"These prices can't be sustained in the light of overcapacity in China and there is a huge supply overhang worldwide, despite falling LME inventories," said Commerzbank analyst Eugen Weinberg.
Stocks of aluminium in LME-registered warehouses have fallen more than 25 per cent since March to 2.12 million tonnes, which has tightened the LME market and boosted aluminium this year.
In reality, however, supplies are abundant and global inventories are estimated at about 15 million tonnes.
"The fundamental outlook for aluminum appears to be incrementally loosening (in the fourth quarter)," JPMorgan analysts said in a note, adding that demand growth of 7.2 per cent so far this year could slow to five per cent in the fourth quarter.
Other industrial metals also slipped, partly because of a stronger US currency, which makes commodities more expensive for non-US firms in a relationship that is used by funds to generate buy and sell signals.
Copper ended down 0.7 per cent at $US4,812 a tonne.
Zinc slumped 3.4 per cent to end at $US2,250, having earlier touched its lowest since September 26.
Traders attributed zinc'z fall to news that the Antamina mine in Peru was planning to double output to between 340,000 and 360,000 tonnes.
Lead ended 2.5 per cent down at $US2,047.50, while tin lost 1.3 per cent to close at $US19,825 and nickel finished with a one per cent decline at $US10,430.
Nickel prices have been boosted in recent weeks by an environmental audit in the Philippines, which has resulted in a number of mine closures.
"The audit impact has now been sidelined by evidence that the Indonesian government is seriously contemplating an amendment of the 2014 nickel ore export ban," Standard Chartered said in a note.