Dollar Strength and Liquidity Squeeze Hit Aluminum and Copper
The global aluminum and copper markets have taken a hit due to a combination of factors. The Chinese futures market was closed for the National Day holiday, which left fewer participants providing liquidity on the London Metal Exchange (LME). This led to a stronger US dollar, making it more expensive for buyers using other currencies to purchase these metals.
The LME three-month aluminum price fell 1.5% to $3,121 a metric ton after touching $3,116, while copper slid 1.1% to $14,254.50 after hitting $14,213.50. The Shanghai Futures Exchange (SHFE) will reopen on October 8th, which is expected to bring more liquidity and potentially higher prices.
The SHFE's reopening also has the potential to cause short-term volatility as traders may have to reprice quickly across aluminum and copper curves if Chinese prices don't match what happened in London. This could lead to a 'catch-up' window when the SHFE reopens, with LME moves potentially overshooting due to fewer participants providing liquidity.