Aluminium drifts lower on profit taking; copper spread spikes

LME zinc CMZN3 rose 0.2% to $3,760 a ton, lead CMPB3 added 0.3% to $1,893, nickel CMNI3 edged up 0.1% to $16,790 and tin CMSN3 gained 0.5% to $56,150.

($1 = 6.7430 Chinese yuan renminbi)

Aluminium prices edged lower on Friday as investors locked in profits from a rally, while shortages of copper and short-covering sent a key spread to its strongest since 2021.

Benchmark three-month aluminium CMAL3 on the London Metal Exchange slipped 0.2% to $3,251 a metric ton by 1615 GMT while three-month copper CMCU3 added 0.2% to $14,171 after earlier trading in the red. LME copper has gained 9% since touching a seven-week low on June 24 on declining inventories and tight supply outside the United States.

"We're seeing some profit-taking after a strong run-up, but that uptrend looks fairly solid. The long-term drivers are not going to go away anytime soon and will continue to underpin prices," said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.

A rush by investors to cover bearish positions pushed prompt copper prices into the most extreme backwardation since 2021 on Friday ahead of a benchmark contract expiry next week.

The backwardation – a market structure whereby prices for prompt delivery are higher than those further forward – underscores a severe lack of inventories.

The premium of the cash LME copper contract above the three-month forward CMCU0-3 hit $434 a ton, up from $45 two weeks ago and the strongest since October 2021.

LME copper inventories extended their decline on Friday to 204,975 tons, down 48% since late May.