LONDON: Aluminium prices fell to their lowest level in two-and-a-half months on Monday as a U.S.-Iran framework agreement to end their war improved prospects for deliveries from Gulf producers, even though shippers were still cautious on transit through the Strait of Hormuz.
The benchmark three-month aluminium on the London Metal Exchange was down 3.3% at $3,418 a metric ton by 1008 GMT, having hit $3,417, its lowest since March 30.
U.S. and Iranian officials said they had reached an agreement to end their war and reopen the Strait of Hormuz, a preliminary pact that sent oil prices falling but leaves the fate of Tehran’s nuclear program to further negotiations.
The reopening of the Strait of Hormuz, where shipping has been largely suspended since the end of February, would improve prospects for aluminium exports from the Gulf region.
Producers in the region, typically accounting for around 9% of global supply, use the crucial waterway to ship their metal to global markets and import alumina, a raw material.
Shippers said confidence in resuming transit through the Strait of Hormuz could take weeks to rebuild and navigation would only restart once safety is assured.
The selloff in aluminium was also caused by the break below the 50-day moving average, a key technical level currently at $3,575, last week, said Alastair Munro, senior base metals strategist at broker Marex.
The next level of support is provided by the 200-day moving average at $3,396.
In other LME metals, copper rose 0.2% to $13,719, after hitting $13,893.50, the highest level since June 5, as a fall in oil prices eased energy-driven inflation fears and weakened the dollar.
LME zinc fell 0.3% to $3,571, lead rose 0.3% to $1,971.50, tin gained 2.3% to $55,000, while nickel added 0.7% to $17,955.
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