LONDON: Aluminium prices fell to four-month lows on Friday as concerns about demand created by a slowdown in manufacturing activity, particularly in China, the world’s top consumer, were reinforced by a strong dollar.
Benchmark aluminium on the London Metal Exchange was down 2.5% at $2,842 a tonne at 1556 GMT, on course for its sixth consecutive weekly loss.
Prices of the metal used widely in the power, construction and packaging industries earlier touched $2,832, a drop of about 30% since early March and the lowest level since Jan. 5.
“Concern about growth and demand headwinds from China’s ongoing COVID lockdowns is a primary driver of the selling pressure in base metals,” said AMT analyst Tom Mulqueen.
“Slowing global manufacturing growth, Fed rate hikes and broader inflationary pressure on economic activity also weigh.” ACTIVITY: China’s factory activity shrank at the sharpest pace in 26 months in April, while manufacturing activity in the United States and the euro zone slowed.
COVID: China’s trade data due on Monday is expected to show export growth slowed in April as strict COVID-19 curbs hit output while imports likely extended declines.
DOLLAR: The stronger US currency makes dollar-priced commodities more expensive for holders of other currencies, a major headwind for demand and prices.
UNITED STATES: The Federal Reserve on Wednesday raised its benchmark overnight interest rate by half a percentage point, the biggest jump in 22 years, to combat soaring inflation.
Industrial metals came under further pressure after US data showed job growth in April was above consensus, reinforcing the idea of a strong economy and potentially bigger interest rate rises.
TECHNICALS: Traders say further losses are likely for aluminium if the 21-day moving average, which is trending down, falls below the 100-day moving average.
Strong upside resistance for aluminium comes in at around $2,950, where the 200-day moving average currently sits.
COPPER: Copper stocks in LME-registered warehouses at 170,025 have nearly tripled over the past couple of months and are at their highest since last October.
This has weighed on copper prices, which are hovering near their lowest level since December.