Fund liquidation sends aluminium to four-month low, also hits copper

By Eric Onstad

Aluminium prices sunk to their weakest in four months on Wednesday and copper also gave up ground, as funds continued to liquidate bullish positions on worries over higher U.S. interest rates and uncertainty about negotiations to end the Iran conflict.

Benchmark three-month aluminium LME:AH1! on the London Metal Exchange shed 0.9% to $3,058 a metric ton by 0930 GMT, having touched its lowest since February 19 at $3,045.50.

The metal used in transport, packaging and construction posted its biggest quarterly and monthly declines in years on Tuesday.

"The sentiment across commodities and metals is not great right now, and that's leading to some speculative long liquidation," said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.

"The macroeconomic perspective especially in the U.S. is adding weight on these markets with the continued dollar strength and yields remaining firm."

The most-traded aluminium contract COMEX:ALI1! on the Shanghai Futures Exchange tracked the LME, closing daytime trade 1% lower at 22,370 yuan ($3,292.47) a ton after hitting a six-month low.

The dollar hit a 40-year high against the yen on Wednesday as a sharp rise in U.S. Treasury yields boosted the currency, while the dollar index TVC:DXY was steady.

A firmer dollar makes commodities priced in the U.S. currency more expensive for buyers using other currencies.

Also weighing on sentiment was news that Iran declined to meet with top U.S. envoys who flew to the region following an outbreak of hostilities, clouding the prospects for a lasting peace between the two countries.

LME copper LME:CA1! slumped 1.6% to $13,165.50 a ton after U.S. officials failed to make an announcement by a deadline of June 30 about whether tariffs would be imposed on refined copper.

Losses in base metals were limited, however, after a business survey showed the manufacturing sector in top metals consumer China expanded for a seventh straight month in June, completing its strongest quarter since late 2020.

Among other LME metals, zinc COMEX:ZNC1! dropped 2% to $3,480 a ton, lead MCX:LEAD1! lost 0.2% to $1,871, nickel MCX:NICKEL1! fell 0.4% to $16,355 and tin MYX:FTIN1! slid 2% to $50,550.

($1 = 6.7943 Chinese yuan renminbi)