Aluminium hits four-month low as Gulf risk premium fades

Aluminium prices hit a four-month low on Wednesday, as investors continued to unwind risk premiums tied to the Gulf despite fresh uncertainty over U.S.-Iran diplomacy. The benchmark three-month aluminium on the London Metal Exchange was down 0.73% at $3,063 a ton, as of 0715 GMT, after touching a four-month low at $3,055.50 earlier in the session. It posted its biggest quarterly and monthly declines in years on Tuesday. The most-traded aluminium contract on the Shanghai Futures Exchange tracked the LME, closing daytime trade 0.95% lower at 22,370 yuan ($3,292.47) a ton, after hitting a six-month low at 22,245 yuan. The unwinding of risk premiums for light metals amid the Iran war pulled the London benchmark lower by nearly 16% in June, even as shipments through the Strait of Hormuz from a region accounting for 9% of global aluminium output have remained limited. Iran said on Tuesday that it would not meet directly with senior U.S. envoys who travelled to the region, clouding prospects for a lasting peace deal. Iranian officials also said the two sides must sort out the terms of a ceasefire signed two weeks ago before moving on to harder issues. Meanwhile, the three-month LME copper lost 1.10%, while the most-traded SHFE copper contract slipped 0.56%. U.S. job openings rose to a two-year high in May, suggesting labour demand remained resilient despite softer hiring. That kept investor focus on inflation risks and the possibility that U.S. interest rates may stay elevated for longer, supporting the dollar. Losses in copper were limited by signs of continued expansion in China’s manufacturing sector. The RatingDog China General Manufacturing PMI eased to 51.7 in June from 51.8 in May, but stayed above the 50-mark separating growth from contraction. The second-quarter average PMI was the strongest since the fourth quarter of 2020, supported by sustained new order growth and improved labour market conditions. Among other LME metals, zinc dropped 1.30%, lead lost 0.61%, nickel dipped 0.38% and tin slid 2.30%. On SHFE, zinc gained 0.64%, lead declined 1.09%, nickel fell 0.63% and tin nudged 0.07% higher.