LONDON: Aluminium prices hit a two-month low on Friday, pressured by disquiet about the impact of higher interest rates on economic growth and metals demand.
Three-month aluminium on the London Metal Exchange slipped 0.5% to $2,315 a tonne by 1805 GMT after touching the weakest since Jan. 6.
“Higher rates expectations are consistent with a more downbeat and cloudy view of metals demand, so it’s no surprise that prices have come down,” Edward Gardner, commodities economist at Capital Economics, said.
Metals prices pared losses after data showed the US economy added jobs at a brisk clip in February, prompting financial markets to reduce expectations that the Federal Reserve would raise interest rates by half a percentage point this month.
The dollar index weakened after the data, making commodities priced in the US currency less expensive for buyers using other currencies.
US Fed Chair Jerome Powell said this week the central bank may need to hike interest rates higher than expected, fuelling worries among investors it may move too aggressively.
Uncertainty over demand in top metals consumer China after its recent party congress also weighed on prices.
“We saw out of that continued policy support for the property sector, but overall it disappointed some expectations of greater support from the government with the absence of a major stimulus package,” Gardner said.
Healthier supply also pressured the market.
China, the world’s top refined copper producer, smelted 907,800 tonnes of copper in February, up 6.5% on-year and slightly higher than the expected 900,000 tonnes, according to Shanghai Metals Market, which anticipated March output would reach 949,500 tonnes.
Demand in China, however, was picking up, reflected by a decline in stocks, participants said.
Copper stocks in SHFE warehouses ticked down for a second consecutive week to 214,972 tonnes on Friday, 10.8% less compared with last Friday.
LME copper was little changed at $8,854 a tonne, while zinc dropped 1.5% to $2,930 after touching the weakest since Nov. 28.
Nickel eased 2.5% to $22,700, lead dipped 0.7% to $2,070 and tin dropped by 2.6% to $22,740.
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