Aluminum steadied last Friday after its biggest one day increase in nearly three months a day earlier as investors reassessed concerns about capacity cuts in top producer China.
An industry association said last month that China would launch a crackdown to curb the illegal expansion of aluminum capacity and Chinese media on Thursday reported significant shutdowns were in the pipeline.
But offsetting these closures, later reports indicated new capacity was coming on stream.
"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.
Three-month London Metal Exchange (LME) aluminum ended up 0.2 percent at $1,927 a ton, having gained 1.7 percent in the previous session.
"While production may be reduced in China, it is being expanded elsewhere. In the US 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.
LME copper ended up 0.9 percent at $5,926 a ton, helped by encouraging economic reports from top consumer China and as weak US consumer prices and retail sales data dimmed chances of another rate rise this year.
China's fiscal spending jumped 19.1 percent in June this year from a year earlier, quickening sharply from a 9.2 percent growth rate in May and signaling the government efforts to cushion a gradual slowdown in the economy.
Zinc fell 0.6 percent to $2,786 a ton as warehouse inventories monitored by the Shanghai Futures Exchange jumped 16.2 percent from last Friday to 77,786 tons.
