Base metals plunged into bearish territory on Tuesday as investors traded with caution across markets ahead of U.S inflation data that is expected to shed light on when the Federal Reserve will taper its stimulus.
Benchmark copper on the London Metal Exchange (LME) was down 1.5 percent at $9,416 a tonne, aluminium shed 1.4 percent at $2,857 a tonne, a day after recording $3,000 a tonne for the first time since 2008; nickel lost 0.6 percent at $19,600 a tonne, zinc dropped 2 percent at $3,023 a tonne, and lead declined 1.2 percent at $2,265 a tonne. Tin, however, bucked the trend as it rose 0.2 percent at $33,555 a tonne.
Edward Meir, head of commodity research at ED&F Man, a London based commodities trading firm, said the markets are in the midst of an “overdue correction” as there appears to be nothing new for the metals to push higher.
On his part, Ole Hansen, commodity analyst at Danish Saxo Bank, said a high inflation reading could knock prices by raising the prospect of the Fed. withdrawing some of the cash that helped drive prices higher. He added that the overall sentiment towards metals is still very favourable, noting that strong demand would support metal prices, while the combination of inflation and weak economic growth would encourage buying of commodities as an inflation hedge.
Commenting on aluminium’s price trend, analysts at Citi, an American multinational investment bank, said output cuts in China, the world’s largest producer, would cause a 1.1 million tonne deficit in 2021, which is likely to push prices to $3,100 a tonne within a year.