Analysts Predict Limited Downside Risk for Aluminium and Copper Amidst Fundamental Declines

Aluminium and copper prices have recently seen downward movements, with aluminium dropping by 17.5% and copper by 6% over the past month. Despite this decline, fundamental factors suggest that the downside for these metals may be limited. As of the latest reports, aluminium is trading at approximately $3,100 per tonne, reflecting a 3% year-to-date increase, while copper is priced at $13,300 per tonne, up 7.5% year-to-date. Analysts note that supply constraints, especially those stemming from geopolitical tensions in the Middle East, continue to support prices in the longer term.

The recent drop in prices can largely be attributed to enhanced supply dynamics and broader geopolitical factors. The ceasefire agreement between the US and Iran has eased some of the acute supply-side pressures affecting aluminium production in the Gulf region, which had previously obstructed smelting capabilities, removing an estimated 2.3 million tonnes from the market. However, experts caution that the restoration of lost capacities is unlikely to happen quickly, maintaining a supply deficit of around 1.8 million tonnes in the aluminium market. This backdrop of constrained supply is paralleled in the copper market, where tightening supply and sustained demand are expected to drive resilience, despite potential macroeconomic uncertainties impacting price movement.

In the short term, traders and investors may experience fluctuations in both aluminium and copper prices throughout the latter half of the year. Analysts predict a potential rebound in aluminium prices against a backdrop of tight market conditions, while copper is expected to see support from robust demand behavior among downstream industries. Yet, macroeconomic headwinds and uncertainties regarding future US tariffs on copper could introduce volatility. Overall, while immediate price movements may present challenges, the long-term fundamentals for both aluminium and copper remain supportive, suggesting a cautious but optimistic outlook for market participants.

Source: Market Source

(Expert Note: This report was independently prepared by the Wealthova Commodities team.)