Aluminium hits four-month low as Gulf risk premium fades

Aluminium extended losses to hit a four-month low on Wednesday, as investors continued to unwind risk premiums tied to the Gulf despite fresh uncertainty over U.S.-Iran diplomacy.

The benchmark three-month aluminium on the London Metal Exchange fell 0.41% to $3,073 a ton by 0320 GMT. It touched a four-month low at $3,060 earlier this session, following logging its biggest quarterly and monthly declines in years on Tuesday.

The most-traded aluminium contract on the Shanghai Futures Exchange tracked movements on the London bourse, dropped 0.73% to 22,420 yuan ($3,300.94) a ton, after hitting its lowest since December 17 at 2,2245 yuan, a six-month low.

The unwinding of risk premiums for light metals amid the Iran war has pulled the London benchmark lower by nearly 16% in June, though shipments through the Strait of Hormuz from a region accounting for 9% of global aluminium output have remained limited.

Iran, meanwhile, said on Tuesday that it would not meet directly with senior U.S. envoys who travelled to the region, clouding prospects for a lasting peace deal. Iranian officials also said the two sides must sort out the terms of a ceasefire signed two weeks ago before moving on to harder issues.

Copper also fell. The three-month LME copper lost 0.95%, while the most-traded SHFE copper contract slipped 0.46%.

U.S. job openings edged up to a two-year high in May, suggesting labour demand remained resilient despite softer hiring. That kept investor focus on inflation risks and the possibility that U.S. interest rates may stay elevated for longer, while keeping the dollar strong.

Losses in copper were limited by signs of continued expansion in China’s manufacturing sector. The RatingDog China General Manufacturing PMI eased to 51.7 in June from 51.8 in May, but stayed above the 50-mark separating growth from contraction.

The average PMI reading for the second quarter was the strongest since the fourth quarter of 2020, supported by sustained new order growth and improved labour market conditions.

Among other LME metals, zinc dropped 0.56%, lead lost 0.93%, nickel dipped 0.20% and tin slid 1.55%.

Elsewhere on SHFE, zinc gained 0.99%,m lead declined 1.46%, nickel declined 0.56% and tin rose 0.80%.