Aluminium prices have slid to a four-year low, in a development that will heap pressure on the struggling smelting industry.

Prices for aluminium, the second most widely used metal after steel, have been under pressure for years as the market struggles with oversupply and towering stocks.

On Wednesday, aluminium prices for delivery in three months on the London Metal Exchange dropped 1.4 per cent to $1,748 a tonne – the first time the metal has traded below $1,750 since July 2009.

The fall in prices is likely to exacerbate the woes of aluminium producers, such as Rusal, Alcoa, Rio Tinto and Chalco. The industry was under pressure even before the recent falls, with analysts estimating that as much as a third of the aluminium smelting industry was losing money.

"We’ve got to see some more closures,” said David Wilson, metals analyst at Citigroup. “You really need to start worrying about some producers,” agrees one senior aluminium producer.

Aluminium producers have already begun to curtail production in the past year. Rusal, the world’s largest aluminium producer, recently announced that its output would be 9 per cent, or 357,000 tonnes, lower this year as it shut down more expensive plants.

According to data from the International Aluminium Institute, an industry body, daily production of the metal in the world outside China fell 4.1 per cent between April and October to the lowest since August 2010.

Nonetheless, bears argue that the cuts have been too slow to balance the market amid hefty increases in production from China and low-cost producers in the Middle East.

"It’s an oversupplied market that’s grinding prices lower,” said Mr Wilson of Citigroup. “The industry is still not really adjusting.” He predicts that prices could drop below $1,700 within the next few months.

Both Rio Tinto and BHP Billiton have made clear they would be willing to sell part or all of their aluminium divisions; Rusal’s share price has fallen 57 per cent so far this year, and is down 82 per cent since the start of 2011.

Indeed, the investment community remains widely unenthusiastic about the metal, believing that producers are likely to respond to any price increase by restarting production. “The market is chronically hated,” one trader said.

The market has been burdened by large inventories since the financial crisis, when producers did not cut output as fast as demand fell. Aluminium stocks in LME-registered warehouses stand at 5.4m tonnes, with analysts estimating that at least that much again is held outside the LME system.

The bearishness has been exacerbated by the recent decision by the LME to increase the flow of metal out of the largest warehouses, where long queues to deliver out metal have caused controversy.

Despite that, however, traders say availability of physical aluminium remains tight, as investors lock up the metal in so-called “financing deals”. "To get metal between now and six months forward is very difficult,” said one trader.