Aluminum prices retreat from peak in 16 weeks

LONDON — Aluminum prices slipped on Friday from a 16-week high reached in the previous session as investors began to question whether a plant producing the raw material alumina would close.

Copper, lead and zinc also fell sharply as industrial metals were caught up in a wider sell-off of US and European equities.

“This macroeconomic fog is hindering any further advances and putting a cap on metals prices,” said Societe Generale analyst Robin Bhar.

Benchmark aluminum on the London Metal Exchange (LME) closed down 1.8% at $2,130 a ton after reaching $2,267, the highest since June, on Thursday. It was still up around 3.3% this week.

Analysts were unsure how long a shutdown would last at Norsk Hydro’s Alunorte alumina refinery, the world’s largest, after the Brazilian state of Para said it had been surprised by the closure and asked for an explanation.

“There is growing noise in the market… that the decision to fully shut operations was a tactic to put pressure on authorities, who up until now had restricted production to just 50% of capacity,” ING analysts said in a note.

Alumina is a raw material used to make aluminum.

Aluminum had fallen back below its 200-day moving average at $2,163 and a Fibonacci level at $2,173, worsening its technical picture.

Lower inventories still signal a tightening market, with aluminum stocks in LME-certified warehouses slipping to 966,900 tons, the lowest since 2008, and ShFE warehouses holding 832,256 tons, down from just under 1 million tons in May.

Another signal of less abundant supply is a narrowing of the discount of cash aluminum over the three-month contract to $2.50 from almost $40 a month ago.

Signals pointing to potential shortages across industrial metals have been submerged by uncertainty about how demand will be hit by trade wars, rising US interest rates and a slowdown in China.

“The fundamental data, which are being largely ignored at present, justify higher prices (for metals),” analysts at Commerzbank said in a note.

The LME’s index of six industrial metals is down around 13% from the June high.

LME copper ended down 1.9% at $6,173 a ton; zinc finished 0.7% lower at $2,635; lead fell 0.5% to $1,997; and tin closed unchanged at $18,975.

Nickel bucked the trend, closing 1% higher at $12,620 a ton. —