Base metals prices rose in London on Wednesday, driven by strong industrial profit gains in China, the world’s top consumer of metals. Aluminium reached an eight-month high due to technical buying and concerns over supply.
After the Christmas break, three-month aluminium on the London Metal Exchange (LME) rose 2% to $2,373.5 a metric ton, reaching its highest point since May 2 at $2,382.
The surge in aluminium prices can be attributed to buying by Commodity Trade Advisor (CTA) investment funds, which heavily rely on computer programs, according to a trader.
Additionally, supply concerns surrounding Guinea, the world’s third-largest producer of bauxite, the raw material used in alumina production, were also a factor. On December 18, a blast damaged fuel tanks at the country’s main oil terminal for fuel imports. While Guinea announced that efforts were underway to improve fuel supplies to petrol stations through diplomatic negotiations with neighboring countries, the impact on aluminium production and fuel costs for bauxite mines remains an ongoing issue.
Most bauxite mines will have diesel in stock, but those stocks will not last forever, said Edgardo Gelsomino, aluminium assets research director at Wood Mackenzie. Affected mines will be able to adjust their logistics to bypass the damaged infrastructure, but this may increase their delivered costs of fuel.
Despite daily LME data showing a rise in total stocks in LME-registered warehouses, aluminium prices continue to climb.
The weakening dollar also played a role in the rise of base metals prices. The dollar reached a five-month low, fueling expectations of a potential interest rate cut by the Federal Reserve. This makes dollar-priced metals more appealing for buyers who use other currencies.
LME copper increased by 0.5% to $8,616 a ton, while zinc rose 1.1% to $2,630, hitting its highest level since November 16 at $2,644. Tin experienced a 3% surge to $25,605, reaching its highest point since September 28 at $25,845. Lead advanced by 0.8% to $2,080, and nickel saw a 2.3% increase to $16,885 a ton. The nickel market is currently focused on Indonesia, the top producer, where workers are demanding improved work safety measures after a fatal accident.
The rise in base metals prices highlights the strong demand from China and the potential impact of supply concerns. With the weakened dollar adding to the appeal of metals, investors are closely watching market developments and assessing their potential implications.
