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In this regular monthly report, Metal Bulletin Research's base metals team summarise their expert analysis of the key factors driving the markets and give a short-term forecast for prices.
Aluminium
LME aluminium prices have fallen from a peak of over $3,200/tonne to a low of $2,420/tonne, but unlike many other base metals, the decline has been orderly. The fact that prices have not held the support levels suggests a change of sentiment, and aluminium seems to be affected by two factors. First, institutional investors have moved to a more risk-averse stance, which has led to liquidation selling that has hit all metals. Second, Chinese production of alumina and aluminium have picked up markedly and exports of primary metal have risen.
But consumer demand remains strong, as indicated by firm premiums and the general drawdown of LME stocks across all geographical areas. Decent demand and less forward selling indicates that prices look set for a period of consolidation.
However, the metal is vulnerable to further liquidation selling should global markets suffer another bout of risk reduction. MBR does not think that the funds will re-enter the market in the near future to give any upward momentum, and prices may test lower levels again where a good base is likely to build.
Copper
Copper prices fell to $6,4007tonne during intraday trading on 14 June, a 27% correction from the highs, but is this enough? Judging from the long-term uptrend lines over the past year, prices could actually fall back to $5,500/tonne without damaging the overall bull trend, so the correction may not be enough.
The main reason for the correction is a change...