SHANGHAI - Aluminum inventories in China, the largest user, rebounded 30 percent in the past three weeks and analysts expect further increases as physical trading has slowed along with the nation's economic growth.

Stockpiles were about 300,000 metric tons at the end of last week, up from a 2011 low of 230,000 metric tons on Sept 23, said Huang Fulong, head of the research department at Guangzhou KT Commodity Information & Consulting Co, citing the company's own survey.

The group, set up in 2009, was previously a research unit of Guangzhou KCTH Trading Co.

Aluminum has declined 13 percent this year, compared with a 22 percent drop on the London Metal Exchange Index. Climbing production costs and output losses in the second half of last year in China, the biggest producer, have supported the metal.

Total commercial inventories climbed above 1.2 million metric tons in May 2010, according to Guangzhou KT.

"We learned some manufacturers' orders shrank by more than 20 percent, so trading was very thin after the National Day holidays" in the first week of October, said Eric Zhang, an analyst at data provider SMM Information & Technology Co.

"Downstream users are mostly drawing down their inventories now and demand looks even more sluggish than in the summer lull."

Stockpiles monitored by the Shanghai Futures Exchange surged 39,754 tons to 117,132 tons last week, the first weekly increase in seven months, according to a survey of 20 warehouses in Shanghai, Guangdong, Jiangsu and Zhejiang provinces.

Inventories sank to a four-year low of 97,911 tons as of Sept 30, weekly bourse data showed.

"It isn't unusual for stockpiles to rise during the week- long holidays," said Zhang.

"However, fabricators are supposed to restock after the holidays and it is the lack of such activities this year that are really worrying."

On the Guangdong Nanhai Spot Market, a major nonferrous metals market in southern China, aluminum was at 16,650 yuan ($2,610) a ton on Wednesday.

China's gross domestic product grew 9.1 percent in the third quarter from a year earlier, the slowest pace since 2009 and less than the median estimate of 9.3 percent in a Bloomberg News survey of 22 economists.

The expansion followed a 9.5 percent rise in the previous quarter.

Aluminum output in China climbed to a record 1.59 million tons in June due to capacity expansion. It then fell to 1.52 million tons in September as power constraints in southwestern China forced smelters to reduce output.

Electricity output totaled 386.1 billion kilowatt-hours last month, falling 9.4 percent from 426 billion in August, the National Bureau of Statistics said on Oct 18.

This was the first month-on-month decline since April.

Bloomberg News

、