Base Metal Report by Mr. Saish Sandeep Sawant Dessai, Research Associate- Base Metals, Angel One Ltd
Given the macroeconomic uncertainties, aluminum prices fell to 17-month lows as production cuts in Europe were overshadowed by concerns about economic growth and the dollar gaining against its rivals.
The current positive momentum in aluminum was driven by improved sentiments in China, the world's largest metal consumer, which announced numerous measures to help its economy recover as well as stimulus measures for the crisis-plagued property sector. However, smelter shutdowns or output cuts boosted prices further.
The recovery became jittery following the Fed Chair's speech at the Jackson Hole Symposium, which indicated that the central bank would be committed to raising interest rates in order to bring rising inflation under control, which is currently far above the Fed's targeted inflation, sending the US Dollar index soaring and reaching new all-time highs, making dollar-priced metals more expensive for buyers holding other currencies. The uncertainty has grown as China's strict zero-COVID policy has put cities like Chengdu on lockdown, restricting people's movement and creating concerns about metal demand.
However, the metal may remain under pressure due to negative sentiments, but smelters that are having a difficult time due to rising power prices in Europe, additional smelters may reduce their production capacity, limiting the metal's downside risk.
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