Aluminum and copper prices fall on fears of new lockdowns in China

Aluminum prices hit their lowest level in six months on Monday as fears of further lockdowns in China – the metal’s biggest consumer – inflation and rising interest rates prompted a sell-off, though the lower inventories provided some support. The copper was also down.

Benchmark aluminum on the London Metal Exchange (LME) was trading down 2.8% at $2,605 a tonne, after touching $2,595, its lowest level since December 15.

Three-month copper on the London Metal Exchange was down 1.7% at $9,283 a tonne at 11:41 GMT.

“The outlook looks pretty bleak…high inflation, the ongoing war in Ukraine, stubborn energy prices, and a Chinese government that keeps the country’s growth bottled upsaid Edward Meir, an analyst at ED&F Man Capital Markets.

Authorities in Beijing have scrambled to contain a COVID-19 outbreak detected in a 24-hour bar, with millions subjected to mandatory testing and thousands subjected to targeted lockdowns.

Rising inflation around the world, in part due to rising energy costs, means consumers are likely to cut back on appliance purchases, undermining demand for industrial metals.

Russia’s invasion of Ukraine has pushed oil prices up more than 50% since January.

Central banks raising interest rates to curb inflation also means consumers are tightening their belts and hurting demand.

The market expects the US Federal Reserve to raise rates this week, with some forecasting a 75 basis point hike.

Aluminum stocks in LME-registered warehouses stand at the lowest level in the last 21 years, at 423,975 tonnes, compared to figures close to two million tonnes in March 2021.

Stocks in warehouses overseen by the Shanghai Futures Exchange, at 269,583 tonnes, have fallen more than 20% since mid-March.

Among other base metals, zinc fell 2.9% to $3,587, lead fell 1.8% to $2,110, tin fell 2.7% to $34,300 and nickel was down 2. 9% to US$26,475 a ton.

With information from Reuters