Aluminium falls to a 12-week low on stronger dollar

By Polina Devitt

LONDON, Oct 1 (Reuters) - Aluminium prices fell to a 12-week low on Thursday and copper hit its lowest in two weeks as a stronger dollar and thin trading volumes weighed on sentiment, with markets in top consumer China closed for a public holiday.

Benchmark three-month aluminium on the London Metal Exchange was down 1.5% at $3,121 a metric ton by 1005 GMT after touching $3,116 for its lowest since July 7.

The dollar hit a more than three-month high on Thursday while global bonds were engulfed in another selloff, with borrowing costs from the US to France and Japan hitting levels not seen in decades.

A stronger dollar makes dollar-denominated metals more expensive for buyers using other currencies.

Aluminium prices are down 17% since hitting a four-year high in June on easing worries about supply from the Gulf region and expectations of new production capacity in Indonesia.

Analysts at Macquarie downgraded their forecast for this year's deficit in the global aluminium market to 820,000 tons, down 120,000 tons from their June estimate, as restarts in the Middle East progressed faster than expected.

Emirates Global Aluminium (EGA) said in late August that it had brought a quarter of its Al Taweelah smelter in Abu Dhabi back online as the company works to recover from damage caused by an Iranian attack in March.

In the near term, the aluminium market is relatively tight, Macquarie said in a research note, squeezed by Chinese downstream restocking ahead of the public holiday. However, the market is still on track to swing to a surplus of 410,000 tons in 2027.

Macquarie expects average aluminium prices at $3,050 in 2027 compared with $3,325 this year.

On the supply side, Rio Tinto RIO.AX reached agreements to secure the ongoing operation of its Bell Bay Aluminium smelter in Tasmania to the end of 2031.

Among other LME metals, copper fell 1.1% to $14,254.50 a ton after hitting its lowest since September 17 at $14,213.50.

Supervisors at Chile's Escondida copper mine, the world's largest, rejected a collective contract offer, paving the way for a potential strike.

LME zinc lost 2% to $3,751 a ton, lead eased 0.2% to $1,869, tin was down 0.1% at $53,780 and nickel dipped 0.9% to $15,785.

The Shanghai Futures Exchange was closed for China's National Day holiday until October 8.