Aluminium at 4-month low on short positions buildup, high inventory

The most-traded three month contract for aluminium dipped to $2,239.5 per metric tonne

By Reuters

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Employees work at the production line of aluminium rolls at a factory in Zouping, Shandong province, China. —Reuters file

Published: Mon 29 Jul 2024, 9:25 PM

Aluminium prices slid on Monday to their lowest in over four months with short positions buildup on high inventories, while market participants awaited a Federal Reserve policy meeting and U.S. data releases this week for further direction.

The most-traded three month contract for aluminium dipped to $2,239.5 per metric tonne, its lowest since March 11. It last traded 2% lower at $2,244 as of 1638 GMT.

Fast money continued to build up short positions on aluminium whilst the overall short positions for metals are also growing on LME, brokerage Marex said in a report.

Aluminium stocks monitored by Shanghai Futures Exchange retreated slightly to 264,158 tonnes, but it remains the highest level in 15 months.

China, the world’s biggest producer, produced 3.67 million tonnes of aluminium in June, the most in nearly a decade.

“LME aluminium may seek support at $2,234 per metric tonne this week, failure of which could be followed by a drop towards $2,108,” Reuters analyst Wang Tao said.

In terms of macro-drivers, Ole Hansen, head of commodities strategy at Saxo Bank, said the metals market risk will hinge on the tone about interest rate cuts from three central banks’ meetings this week.

The Federal Reserve is expected to keep rates unchanged on Wednesday, but softer U.S. jobs data in June, cooling inflation and comments from top Fed officials have prompted the rate futures market to more than fully price in a 25 basis-point cut in September.

The Bank of England and Bank of Japan also hold policy meetings this week.

Market participants expect lower borrowing costs could support manufacturing, therefore metals demand.

“But copper had already priced in lofty prospects of rate cuts in the earlier rally,” Hansen said.

Three-month copper fell 0.8% to $9,043. It was down by more than 18% from all-time highs in late May.

Copper prices briefly pared losses after news that the union at the world’s largest copper mine, Escondida mine in Chile, has called on members to reject a final contract offer from the company and prepare for a strike.

For other metals, LME lead dropped 0.2% to $2,064 a ton, zinc was down 1% at $2,642.5, tin was down 0.6% at $29,400, nickel moved 0.7% higher to $15,905.