(June 23): Aluminium tumbled by more than 4% and other metals posted sharp declines after a bearish turn for equities weighed on sentiment in commodities markets.
Global stocks slumped as investors rotated out of technology stocks and investors mulled further hawkish comments from a Federal Reserve official. Metals have been keyed to shifts in equities markets in recent months as investors bet on growing demand from artificial intelligence and power infrastructure.
That backdrop piled pressure on metals, with all main contracts on the London Metal Exchange sharply lower. Aluminium is under additional strain as the US and Iran make progress on peace talks, spurring bets of a recovery in Middle Eastern supply.
Aluminium fell as much as 4.1% to US$3,226 a tonne and traded at US$3,242.50 a tonne by 3.14pm Shanghai time. Other metals correlated with technology trades also sold off, with copper down 1.3% and tin falling 3.8%.
The US issued a 60-day licence allowing Iran to sell oil on the international market, offering economic relief to Tehran and signalling relatively smooth negotiations. Traders are monitoring how quickly flows of aluminium can recover from the Middle East, a major supplier until the war began in late February.
“Geopolitical risks have eased with agreements signed between the US and Iran,” Chaos Ternary Futures Co said in a note. “The Strait of Hormuz is likely to open, fuelling expectations for resumption of aluminium smelters in the Middle East.”
See also: Copper rallies as peace-talk progress eases inflation fears
For the broader metals complex, inflation fears and the likelihood of higher interest rates also pose downside risks. Federal Reserve Bank of Chicago President Austan Goolsbee said Monday he was concerned about inflation, following hawkish comments last week from Fed Chair Kevin Warsh.
Aluminium is still up over 8% this year but this month’s sharp declines have dragged prices back to levels just prior to the US and Israeli attacks on Iran in late February. One of the biggest supply shocks to ever hit the market has been blunted by record exports from China.
Uploaded by Arion Yeow
