Aluminium at 17-month lows as strong dollar overshadows smelter cuts

Updated 06 Sep, 2022

LONDON: Aluminium prices fell to 17-month lows on Tuesday as a strong dollar and worries over economic growth overshadowed production cuts in Europe.

The dollar was close to 20-year highs, which makes dollar-priced metals costlier for buyers with other currencies and can deter buyers.

Pushing it up are an energy crisis in Europe and strict COVID-19 controls in China that have slowed economic activity and hammered the yuan and euro.

Sky-high energy prices in Europe have forced smelters to reduce output – with France’s biggest aluminium smelter the latest to cut – but they also harm other industries, shrinking demand.

Benchmark aluminium on the London Metal Exchange (LME) was down 0.3% at $2,278 a tonne at 1044 GMT.

The metal used in construction, transport and packaging is down 44% from a high in March and down 19% this year.

Prices are unlikely to recover until the dollar stops rising, said Saxo Bank analyst Ole Hansen.

“Metal consumption should decline, driven by a Europe-led downturn in the months ahead,” analysts at Citi said.

But Citi said supply cuts may still push aluminium up.

Copper dips as weak Chinese demand dominates

Aluminium smelters in Europe have already cut capacity by a million tonnes since energy prices began rising in 2021 and analysts are braced for more.

On Tuesday, a source said France’s Aluminium Dunkerque would cut production by one-fifth and Norsk Hydro said it would keep a small portion of its capacity in Norway offline after maintenance.

However, aluminium stocks in LME-registered warehouses rose by 31,325 tonnes to 308,375 tonnes on Tuesday, easing supply worries.

LME stocks are down from almost 2 million tonnes in March 2021 but outflows halted in recent weeks.

In China, meanwhile, the central bank moved to support the yuan and officials signalled a renewed sense of urgency on economic stimulus that should support metals demand.

LME copper was up 0.2% at $7,666 a tonne, zinc fell 0.6% to $3,178.50, nickel was flat at $21,465, lead rose 1.2% to $1,898 and tin was up0.4% at $21,700.

Read Comments