LONDON: Aluminium prices slumped on Thursday as raw material supply concerns eased and investor optimism over early interest rate cuts waned.

Three-month aluminium on the London Metal Exchange (LME) shed 1.5% to $2,279 per metric ton by 1125 GMT, heading for a third consecutive session of losses.

Aluminium prices hit their highest in eight months last week, partly owing to worries that shipments of bauxite, the raw material needed to make aluminium, would be delayed after an explosion in major producer Guinea.

The rally was fuelled by speculative Commodity Trading Advisor (CTA) funds, which are often driven by computer programmes, said Alastair Munro, strategist at broker Marex.

Munro said that CTAs drove aluminium higher last week, spurring short-covering in the market, but that he has been told there have been no bauxite shipment problems after the Guinea blast.

Copper, Aluminium retreat on profit-taking

The closure of the arbitrage window between the LME and China also contributed to weak prices, Munro added.

Also weighing on the metals market was uncertainty about when U.S. interest rates would be cut after minutes of the Federal Reserve’s last meeting provided few clues.

“As those bets on early rate cuts are being rejigged, metals are correcting. There’s a world of pain and uncertainty out there,” Munro said.

Helping to cap losses was a slight drop in the dollar index. A weaker dollar makes commodities priced in the U.S. currency less expensive for buyers using other currencies.

LME copper fell by 0.5% to $8,474 a ton.

The Yangshan copper premium dropped to $65.50 a ton, down 42% in only a month, indicating low demand for refined copper imports into China as domestic output grew.

LME nickel eased 0.8% to $16,280 a ton, zinc shed 1.3% to $2,553, tin was down 0.4% at $25,195 and lead was little changed at $2,046.50.