Aluminum prices fell to their lowest level since March 2021 on Wednesday as markets positioned for another sharp interest rate hike from the US central bank that could dampen economic growth.
Rising rates also helped push the dollar to a 20-year high, putting pressure on metals priced in dollars by making them more expensive for buyers with other currencies.
Benchmark aluminum on the London Metal Exchange (LME) fell 1.7% to $2,208.50 a tonne, posting a 21% loss so far this year.
If the Federal Reserve announces a 75 basis point interest rate hike, as the market expects, this could boost metals, but a 100 basis point hike would likely send prices lower, ING analyst Warren Patterson said. .
Demand for metals is slowing, but supply is also tight, Patterson said. “Fundamentally, for most metals, the price outlook remains favourable. There is a lot of supply risk and inventories are low.”
High energy costs have forced European aluminum smelters to cut annual production capacity by 1.1 million tonnes and some Chinese smelters face power rationing.
Despite this, global aluminum production rose 3.5% year-on-year in August to 5.888 million tonnes, according to data from the International Aluminum Institute (IAI). Thanks to new smelters, Chinese production reached record levels.
Aluminum is one of the main raw materials in industries such as automotive, food, pharmaceutical and construction. An economic slowdown affects these industries and therefore tends to lower the consumption of this material.
Among other industrial metals, copper fell 1% to $7,681.50 a tonne, zinc fell 0.8% to $3,102.50, lead fell 1.6% to $1,850 and tin fell 0.2% to $21,150. Nickel bucked the trend, adding 0.1% to $25,000 a tonne.
With information from Reuters.