LONDON: Aluminium prices were set to end the week around 4% lower as fears of rapid US interest rate hikes dampened the outlook for economic growth and metals demand.
Prices, however, rose on Friday after the Wall Street Journal reported that some Fed officials may wish to slow the pace of rate increases soon, lifting stock markets and weakening the dollar. Earlier in the day, US 10-year bond yields hit their highest since 2007 and China’s yuan fell to its weakest against the dollar since 2008, making dollar-priced metals costlier for buyers in the biggest metals-consuming country.
Ample supply kept aluminium under pressure, with the delivery of around 250,000 tonnes into the London Metal Exchange’s (LME) warehouse system in the last 10 days.
Even though around 200,000 tonnes were earmarked for shipment out of the LME system, cash aluminium still traded at a discount to the three-month contract, suggesting that plenty of metal was available. Benchmark LME three-month aluminium was up 0.4% at $2,218 a tonne as of 1620 GMT.
Prices of the metal used in packaging, transport and construction have fallen around 45% from a peak in March as Covid-19 lockdowns in China and rapid interest rate hikes in the United States and elsewhere weakened the global economy. “Again, fears of interest rate rises dampened risk appetite,” a China-based futures trader said. “But the tight supply and solid demand could prevent it from any sharp fall.”
Analysts at Goldman Sachs said: “The drivers of the stronger dollar – weak Chinese property and European industry – are also the drivers of micro headwinds to metals’ end-demand.” “These headwinds will continue to depress base metals’ flat price returns until the Fed ends its tightening cycle,” they said. LME copper was up 1% at $7,636 a tonne, zinc fell 0.7% to $2,944, nickel was 1% lower at $21,965, lead slipped 4.1% to $1,896 and tin was down 3% at $18,770.