LONDON: Aluminium prices dropped to a 17-month low on Wednesday and most other base metals lost ground as faltering global economic growth weakened the outlook for demand and boosted the dollar.
The dollar has strengthened more in 2022 than in any year since 1981 and on Wednesday reached a 20-year high, making dollar-priced metals costlier for buyers with other currencies.
Further increases to US interest rates should serve to keep the dollar strong, analysts say. Global equity markets fell as weaker than expected trade data in China, the biggest metals consumer, added to a grim picture for the global economy.
Benchmark aluminium on the London Metal Exchange (LME) was down 1.1% at $2,236.50 a tonne at 1633 GMT after touching its lowest since April 2021 at $2,233.
The price of the metal used in transport, packaging and construction has fallen 20% this year.
Supply of aluminium and other metals is tight and inventories are low, but the market is more focused on weakening demand and the rising dollar, said independent analyst Robin Bhar.
“If the dollar’s going higher, metals are going to struggle,” he said, predicting that aluminium prices would end the year around current levels. Germany’s Speira on Wednesday said it will reduce aluminium output by 50% because of high energy costs, adding to about a million tonnes of production capacity closed in Europe in the past two years.
However, large inflows of aluminium into LME-registered warehouses have eased supply concerns, flipping quickly delivered cash aluminium from a premium to a discount against the three-month contract.
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