Aluminium prices were also under pressure from easing supply concerns following the latest sanction and trade policy developments in the United States.
The most-traded SHFE June copper contract was at 51,030 yuan ($8,048) per tonne at 1.09 pm Shanghai time, down by 530 yuan from last Friday’s closing price. Around 80,000 lots of the contract have been traded so far. The SHFE was closed on April 30 and May 1 due to public holidays in China.
“Easing trade tensions and a more conciliatory tone from the US on Russian sanctions saw investors’ concerns over supply disruptions ease. Combined with the stronger US dollar, investor appetite for base metals suffered,” ANZ Research said on Wednesday.
The dollar index hit as high as 92.57 on Tuesday – the highest since January 10 – ahead of the US Federal Reserve’s monetary policy meeting later today. The index was at 92.50 at 1.05 pm Shanghai time, down 0.1%.
The Federal Reserve is expected to keep interest rates unchanged but investors will scrutinize its language in the statement for any indications of a June rate rise.
Meanwhile, the US Treasury said on Tuesday investors will get an additional month to divest or transfer their holdings in sanctioned Russian companies including aluminium producer UC Rusal.
The extension on investments followed a US Treasury announcement last week that it would give US businesses until October 23 – instead of June 5 – to wind down dealings with Rusal.
The recent loosening of the sanctions has given rise to bearish sentiment for aluminium prices and premiums because it is seen as allowing Rusal more time to sort out its entanglement with Deripaska and find a way to continue selling into the US.
The US has also postponed imposing Section 232 tariffs on aluminium and steel imported from the European Union, Canada and Mexico until June 1, from the initial deadline of May 1.
In data on Wednesday, China’s Caixin manufacturing purchasing managers’ index (PMI) for April came in at 51.1, close to the expected print of 50.9.
“Overall, operating conditions across China’s manufacturing sector continued to improve in April. But uncertainty in exports has increased significantly, and the dependence of the Chinese economy on domestic demand is rising,” Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group said.
Rest of the complex down, except lead
Currency moves and data releases