Aluminium prices fell to their lowest level in over four months on Monday due to an increase in short positions and high inventories. Market participants are looking towards the Federal Reserve policy meeting and upcoming U.S. data releases for market direction. The most-traded three-month aluminium contract reached $2,239.5 per metric tonne, its lowest since March 11, and was last trading 2% lower at $2,244 as of 1638 GMT.
Short positions on aluminium continue to rise, according to a report by brokerage Marex. Meanwhile, aluminium stocks monitored by the Shanghai Futures Exchange decreased slightly to 264,158 tonnes, maintaining the highest level in 15 months. China, the largest aluminium producer, produced 3.67 million tonnes in June, the highest in nearly a decade.
Reuters analyst Wang Tao predicts that LME aluminium may find support at $2,234 per metric tonne this week, with a potential drop towards $2,108 if this support fails. The metals market's risk will depend on the tone regarding interest rate cuts from three central banks' meetings this week, according to Ole Hansen, head of commodities strategy at Saxo Bank.
The Federal Reserve is anticipated to maintain rates unchanged on Wednesday, but market expectations for a rate cut in September have increased due to softer U.S. jobs data, cooling inflation, and comments from top Fed officials. Lower borrowing costs are expected to support manufacturing and metals demand. However, copper prices have already reflected expectations of rate cuts in earlier rallies.
Three-month copper fell 0.8% to $9,043, down more than 18% from its all-time highs in late May. Copper prices briefly recovered after the union at the world's largest copper mine, Escondida in Chile, called for a strike. Other metals also saw declines, with LME lead dropping 0.2% to $2,064 a ton, zinc down 1% at $2,642.5, tin down 0.6% at $29,400, and nickel up 0.7% to $15,905.
