LONDON: Aluminium and lead prices slid to their lowest in more than two years on Wednesday as computer-driven funds sold after an options expiry amid concerns about demand in top metals consumer China.
Traders said there was no specific news that triggered a sharp reversal in the market around midday after most metals prices had been slightly firmer in the morning. “The market was spooked and we’ve seen quite a few stops hit in zinc and copper. It was more technical selling than anything in a thin market since most of the Chinese are out today,” said a trader at a major broker.
Many markets were closed for the May 1 holiday, including China.
“A lot of the selling is from algos (algorithmic computer-driven funds) and we also had the options expiry this morning so a lot of people had to cover positions,” the trader added.
Analysts said that, while investors welcomed signs of progress in US-China trade talks, they were still concerned after data on Tuesday showed Chinese factory growth unexpectedly slowed in April.
Benchmark lead on the London Metal Exchange was down 2.5 percent at $1,877 a tonne by 1400 GMT after hitting $1,873, the lowest since September 2016.
Lead is the biggest loser on the LME so far this year with losses of about 8 percent.
LME aluminium slipped 0.5 percent at $1,789 a tonne after touching a low of $1,785, the weakest since January 2017.
ALUMINIUM INVENTORIES: On-warrant stocks of aluminium in LME-registered warehouses jumped to their highest since January at 776,675 tonnes, having climbed by a about a fifth over the past week, LME data showed.
COPPER STOCKS: Inventories of copper in warehouses monitored by the London Metal Exchange fell by 8,825 tonnes from the previous day to 173,575 tonnes.
SPREADS: This helped the premium of cash copper over the three-month contract climb to its highest in over a month at nearly $11.75 despite a recent surge in inventories.
COPPER PRICE: LME copper slumped 1.9 percent to $6,292 per tonne, the weakest since Feb. 19.
US RATES: The US Federal Reserve is expected to leave borrowing costs unchanged later on Wednesday.
DOLLAR: Against a basket of six currencies, the dollar was down slightly after hitting a one-week low ahead of the Fed’s decision, making dollar-priced commodities cheaper for holders of non-US currencies.
COLUMN: Industrial metal markets are taking a breather as they await tangible evidence that China’s latest stimulus package is feeding through to a flagging manufacturing sector.
PRICES: LME zinc shed 1.7 percent to $2,777 a tonne, nickel fell 0.7 percent to $12,180, and tin lost 0.7 percent to $19,520.