Aluminum is on track for its steepest monthly loss since October 2008, plummeting over 15% in June. This significant decline began after an interim US-Iran peace deal spurred optimism for a resumption of Middle Eastern shipments through the Strait of Hormuz. This region accounts for nearly a tenth of global output, and the prospect of reopened shipping lanes wiped out gains made over the previous three months. The market has also seen record exports from China and daring voyages through the strait to replenish alumina reserves, further easing supply concerns.
Analyst Peng Dinggui of Zhongtai Futures Co. noted that "Ex-China premiums dropped rapidly following the news of truce deals, signaling supplies are not that tight any more." He added that the rapid plunge in aluminum prices caught many investors off guard, causing panic and leading some Chinese investors to expect further price drops. The market structure has flipped into contango, where prompt prices are cheaper than later-dated contracts, indicating that concerns over a shortage have diminished.
In related news, copper has experienced mixed performance. On June 29, three-month futures dropped towards $13,300 a ton in London, following two weekly declines, as a hawkish Federal Reserve stance and a rising US dollar weighed on industrial metals. However, earlier in June, copper prices had seen advances, with a 0.4% rise to $13,332 a ton on June 30, despite being 2.2% lower for the entire month. Copper also rallied on June 22 after Iran announced major progress in peace talks with the US, boosting expectations for reduced inflation and increased manufacturing activity, a key driver for industrial metals.
Expectations that the Federal Reserve will maintain higher interest rates or even raise them further to combat inflation have impacted demand outlooks for metals, including aluminum, which has also been affected by a sharp run-up in the US dollar since mid-May, making it more expensive for many buyers.
On June 25, copper edged higher after touching a seven-week low, buoyed by a weakening dollar and an artificial intelligence stock rally, countering some concerns about interest rates. Previously, on June 15, copper had also seen an uptick due to optimism concerning global growth following the interim agreement between the US and Iran.
