LONDON: Aluminium prices fell to four-month lows on Monday as fears eased that weekend tit-for-tat strikes between the United States and Iran would escalate into a wider conflict and disrupt Middle East shipments, traders said.
Benchmark aluminium on the London Metal Exchange was down 1.9 percent at USD3,119 a metric ton at 1358 GMT from an earlier USD3,104 a ton. Talks between Washington and Tehran over the Strait of Hormuz, a key shipping channel, will resume on Tuesday in Qatar.
“The situation is still fluid and any renewed disruption could quickly tighten availability for … aluminium,” Britannia Global Markets said in a note.
“The aluminium market suffered significant disruption by the suspension of trade through the strait.”
The Middle East accounts for 9 percent of global aluminium smelting capacity. Disrupted supplies pushed prices to USD3,787.50 this month, the highest since March 2022. Since then, prices of the metal used in transport, construction and packaging have dropped by 16 percent.
As supply worries have receded, the premium for the cash aluminium contract on the LME has flipped from a 19-year high over the three-month forward to a discount.
On the technical front, support for aluminium stands at the 200-day moving average, currently around USD3,160. Resistance on the upside is at the 100-day moving average around USD3,410.
Elsewhere, metals markets are focused on the strength of the US currency, which makes dollar-priced metals more expensive for buyers with other currencies.
The dollar is heading for its largest monthly gain in a year, boosted by growing chances of higher interest rates in the United States to contain inflationary pressures.
“A hawkish US rates backdrop initially drove the selloff across energy and precious metal markets before the industrial metals suite came under pressure last week,” said Alastair Munro, senior base metals strategist at broker Marex. Three-month copper eased 0.6 percent to USD13,283 a ton, zinc slipped 0.2 percent to USD3,467, lead retreated 0.1 percent to USD1,901 and tin was little changed at USD50,540 while nickel lost 1.3 percent to USD16,480.
Clues to demand for industrial metals will come this week from top consumer China’s manufacturing PMIs.
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