Aluminum Slips From Decade High on Dollar as Supply Woes Simmer
(Bloomberg) -- Aluminum slipped from the highest in a decade as the dollar advanced and investors assessed concerns that the coup in Guinea could disrupt supply.
The dollar rose against all of its Group-of-10 currency peers as appetite for riskier assets waned with U.S. stocks retreating. The gain diminished the appeal of commodities for investors holding other currencies.
Aluminum touched the highest since 2011 on Monday amid the Guinea turmoil, with the risk of mining disruption threatening to expedite the market’s descent into deepening deficits. The coup leaders urged mining companies to maintain output of bauxite -- the key material used in aluminum production.
Already, production curtailments in China are reshaping the outlook for supply. Stricter environmental controls will raise costs for producers globally, and aluminum prices may need to hit record highs to boost supply significantly, Trafigura said on Tuesday.
“This is a story writ large across the commodities complex,” Trafigura’s Chief Economist Saad Rahim said on Bloomberg TV. “It’s really just a clear signal from commodities markets that investment needs to happen and it needs to start happening now.”
Aluminum for three-month delivery fell 0.6% to settle at $2,757 a ton at 5:51 p.m. on the London Metal Exchange. Other metals were mixed, with copper falling 1.1% and zinc adding 1.2%.
- Aluminum Corp. of China said all operations are normal, while United Co. Rusal International PJSC said it may need to evacuate staff if the situation deteriorates.
- A potential short-term pause in the shipments from Guinea, which supplies almost a quarter of the world’s bauxite, could lead to price increases throughout the aluminum supply chain, analysts said.
- “The country’s borders have been temporarily closed, so we would expect short-term disruption to shipments to drive bauxite price higher,” and the already bullish outlook in the aluminum market, Morgan Stanley analysts including Susan Bates said in a note.
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