Aluminium extends losses on fears recession would hit demand

ALUMINIUM prices deepened losses on Tuesday as investors worried that renewed lockdowns in top consumer China and a potential global recession could slash demand for metals.

Three-month aluminium on the London Metal Exchange fell 1.1 per cent to US$2,599 a tonne by 1430 GMT after dropping 1.9 per cent on Monday and hitting its lowest since Dec 15.

“There’s a general lack of risk appetite right now and metals are in the firing line because of the recessionary risks to demand,” said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen. “There’s also some nervous trading ahead of tomorrow’s FOMC meeting.”

Eroding inflation data and fast-changing views in financial markets have opened the door to a larger-than-expected three-quarter-percentage point interest rate increase when Federal Reserve officials meet this week.

Meanwhile, concern about demand in top metals consumer China has been rekindled due to fresh Covid-19 lockdowns.

Authorities in China’s capital warned on Tuesday a Covid-19 surge in cases linked to a 24-hour bar was critical and the city of 22 million was in a “race against time” to get to grips with its most serious outbreak since the pandemic began.

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Losses in some metals, however, were cushioned by falling inventory levels and tight supply, Hansen added.

“Inventory levels held by exchanges in London and Shanghai are still on the weak side so how do you square that with prices coming down in anticipation of lower demand? That’s the conundrum the market has to deal with.” REUTERS