ING’s Warren Patterson and Ewa Manthey report that Aluminium led a broad metals sell-off triggered by a sharp global equity decline and a more hawkish Federal Reserve outlook. They stress that Aluminium fundamentals remain supportive, with the global market still seen in deficit this year after conflict-related disruptions removed an estimated 3 million tonnes of production, even as easing geopolitical risks trim some price risk premium.

Supportive fundamentals despite market shakeout

"Metals sold off after a sharp decline in global equity markets sparked a broader risk-off move across asset classes during Tuesday’s session. Aluminium led losses as easing concerns over Middle East supply disruptions and improving US-Iran relations weighed on sentiment."

"Despite the recent sell-off, aluminium fundamentals remain supportive. We continue to expect the global aluminium market to remain in deficit this year; conflict-related disruptions have already removed an estimated 3mt of production."

"Easing geopolitical risks may remove some risk premium from prices, but they don’t materially change the tight underlying market balance."

"Positioning data also turned less supportive. The latest COTR report shows copper net longs fell by 3,669 lots for a third consecutive week to 57,458 lots."

"Aluminium net longs dropped by 6,024 lots to 74,361 lots, the lowest level since January 2023. This is driven largely by long liquidation as concerns over disruption to shipping through the Strait of Hormuz eased."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)