Aluminium extends downside as Gulf output recovers, risk appetite withers

LONDON: Aluminium prices extended losses on Thursday, slipping to their their lowest in more than four months, weighed down by a combination of weaker risk appetite and indications that supply is recovering faster than expected following disruptions from the Iran war.

Benchmark three-month aluminium on the London Metal Exchange was down 0.8% at $3,053 a metric ton by 0930 GMT, marking the fourth straight session of losses. It fell to $3,040 earlier in the session, its lowest since February 19.

LME aluminium has tumbled by nearly 20% over the past month as the U.S. and Iran moved closer to ending the conflict which caused disruptions to output of the metal in the Gulf, which account for about 9% of global production.

The most-traded aluminium contract on the Shanghai Futures Exchange declined 0.4% to 22,400 yuan ($3,300.09) a ton.

“Supply concerns have eased following the ceasefire and improving outlook for regional trade flows, prompting investors to take some of the risk premium out of prices,” said Ewa Manthey, commodities strategist at ING.

Many investors had bet on a slow recovery to Middle East output of the metal used in transport, construction and packaging.

But Emirates Global Aluminium said it would restore production sooner than expected at its damaged Al Taweelah complex - one of the world’s largest aluminium production sites. More supply will be added from other regions as well, with Norsk Hydro saying it would partially restart aluminium production at its smelter in Slovakia in the fourth quarter of the year.

The wider LME complex was in the red as risk appetite waned and Asian shares fell ahead of key U.S. data.

“Broader caution ahead of U.S. payrolls data and concerns over demand are outweighing support from a weaker dollar,” Manthey added.

LME copper shed 0.6% to $13,223 a ton after a closely watched June deadline for a recommendation on potential U.S. tariffs on refined copper passed without an announcement from the White House.

Among other metals, zinc lost 1.5% to $3446.50 a ton, lead dipped 0.1% to $1,864, nickel fell 1% to $16,195 and tin gave up 0.5% to $51,385.