Ebbing Middle East risk premium keeps aluminium under pressure

LONDON: Aluminium prices fell on Friday, with the market expecting an improvement in supplies from the key Middle East region as a U.S.-Iran interim peace agreement appeared to hold.

Benchmark three-month aluminium on the London Metal Exchange was down 0.1% at $3,088 a metric ton by 1016 GMT.

“Weaker demand, easing geopolitical risks and growing expectations of future supply have driven a sharp correction in prices over the past month,” analysts at Citi said in a note.

Citi now expects aluminium to fall further over the coming month and then recover into September–December towards $3,300 a ton compared with the previously expected $4,000.

The metal touched $3,040, its lowest since February 19, on Thursday but managed to stay above a key psychological level of $3,000 as a weaker dollar and easing concerns over an imminent U.S. interest rate hike following softer-than-expected U.S. jobs data provided support.

Easing concerns about future output in the Middle East, which produces 9% of global supply, Emirates Global Aluminium said on Thursday it was restoring production sooner than expected at one of its complexes, damaged by Iranian missile strikes in March.

Meanwhile, Japanese aluminium buyers agreed to pay global producers premiums of $395 per ton over the benchmark for July-September shipments, up 12-13% from the previous quarter, two sources told Reuters.

Higher premium in Japan indicated that some tightness in the global physical market persists, although analysts expect it to loosen in July-August before restocking resumes in September.

In other LME metals, copper rose 0.4% to $13,372 a ton, supported by a weaker dollar.

China’s Yangshan copper premium, which reflects buying appetite in the world’s largest consumer, finished the week at $74 a ton, the highest since mid-April.

LME zinc added 1% to $3,522.50, lead climbed 0.6% to $1,887, tin jumped 2.1% to $52,115 and nickel gained 0.7% to $16,370.