LONDON: Aluminium prices pulled back on Thursday after rising for three straight sessions on supply concerns, as the dollar firmed and the market awaited further news from smelters in the war-hit Middle East.
Benchmark three-month aluminium on the London Metal Exchange was down 1.3 percent at USD3,300 a metric ton in official open outcry activity, having earlier risen as much as 1.7 percent.
The metal hit its highest in nearly four years on Wednesday as force majeures from Mideast smelters Qatalum and Aluminium Bahrain heightened supply fears. The Gulf region produced 8 percent of the world’s aluminium last year.
Analysts at Citi have raised their LME aluminium price target to USD3,600 from USD3,400 and said prices could climb to USD4,000 in a bull-case scenario.
“I think markets are stabilising a little bit,” said Thu Lan Nguyen, head of commodity research at Commerzbank, noting that the euro-dollar rate and Brent crude oil were steadier after days of volatility. “So I think that pullback in the aluminium price basically fits into that picture.”
The market is currently in “wait and see” mode as events in the Mideast unfold, she added.
LME aluminium inventories fell to 459,125 tons, the lowest since July last year, after 2,000 tons of outflows from Port Klang. There was an order to remove more than 45,000 tons from the Malaysian storage location earlier this week, suggesting traders are looking to cash in on supply shortages.
Global inventories are “still at a relatively comfortable level” but stocks in the US are tight, Nguyen said.
The cash LME aluminium contract was trading at only a USD1 a ton premium to the three-month forward, down from around USD4 on Wednesday.