Aluminium falls to 18-month low

22 Sep, 2022

LONDON: Aluminium prices fell on Wednesday to their lowest since March 2021 as markets braced for another hefty US interest rate rise that will suppress economic growth.

Rising rates helped boost the dollar to a 20-year high, pressuring dollar-priced metals by making them costlier for buyers with other currencies.

Also lifting the dollar was appetite for safer assets after Russia’s Vladimir Putin escalated the conflict in Ukraine by ordering the mobilisation of more troops.

Benchmark aluminium on the London Metal Exchange (LME) was down 1.7% at $2,208.50 a tonne at 1635 GMT and down around 21% this year.

If the Federal Reserve announces a 0.75% rate rise at 1800 GMT, as the market expects, this has been priced in and could boost metals, but a 1% increase would likely drive prices lower, said ING analyst Warren Patterson.

Demand for metals is slowing alongside global economic growth but supply is also constrained, Patterson said.

“Fundamentally, for most metals, the price outlook is still supportive. There’s plenty of supply risk and inventories are low.” High energy costs have forced European aluminium smelters to cut annual production capacity by 1.1 million tonnes and some Chinese smelters face energy rationing.

But despite this, global aluminium output rose in August by 3.5% year-on-year to 5.888 million tonnes, International Aluminium Institute (IAI) data show. Thanks to new smelters, Chinese output was at record highs.

After a long period of decline, aluminium inventories have increased in recent weeks in LME-registered warehouses. Stockpiles have also grown in Shanghai Futures Exchange warehouses and at major Japanese ports. In a sign that supply concerns on the LME are easing, quickly delivered cash aluminium slipped to a $20-$25 a tonne discount versus the three-month contract from a $15 a tonne premium in August. LME copper was down 1% at $7,681.50 a tonne, zinc fell 0.8% to $3,102.50, lead was 1.6% lower at $1,850 and tin slipped 0.2% to $21,150.

Nickel bucked the trend, rising 0.1% to $25,000 a tonne.

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