2025-09-18 11:55

LONDON, Sept 18 (Reuters) - The global aluminium market has been in structural supply surplus for so long that it's hard to imagine a genuine shortage of the light metal. Sure, there have been periodic squeezes on the London Metal Exchange (LME) contract over the years and another one is roiling the market right now. Sign up here. But these have been clashes between traders and banks tussling over control of LME inventory. The stocks financing trade, and its multiple warehousing spin-offs, is predicated on there being lots of surplus metal to play with. That, however, may be changing. Indeed, if you believe Citi, this is a market that is "sleepwalking into the biggest deficits in 20 years". It's a punchy call, as is the bank's expectation that the price will have to rise from its current level around $2,700 per metric ton to over $3,000 and stay there to stop the world running out of metal. So how come a market defined by historical excess is now facing imminent shortfall? CHINA HITS THE CEILING The answer lies in China. China's production of primary aluminium has grown from four million tons in 2002 to 43 million tons in 2024. The country now accounts for 60% of global output. China has also become the world's largest aluminium consumer over the same time-frame but persistent over-production has spilled out in the form of semi-manufactured products. Exports last year hit a new record of 6.7 million tons. China, however, is fast approaching peak aluminium thanks to the government's mandated capacity cap of 45 million tons per year. August output was equivalent to 44.5 million tons, according to consultancy AZ Global. Some further output flex is possible if operators increase smelter amperage. But with Beijing showing no sign of adjusting the cap, the country's seemingly relentless production growth is shuddering to a halt. China's aluminium trade patterns are adjusting to the new reality. Exports of products such as rod, tube and foil fell by 9% year-on-year in the first seven months of the year. Imports of primary metal, on the other hand, rose by 11% to 1.5 million tons on the back of a near doubling in shipments from Russia. STOCKS DEPLETION Sanctions on Russian aluminium mean the metal can't be delivered to the LME if it was produced after April 2024, which is why so much is now going to meet China's import demand. The diversion of what was once one of the exchange's main sources of physical liquidity has contributed to falling exchange stocks. What's noticeable, though, is the absence of any significant new inflow from other sources even though the market has been in the grip of a dominant long position since May. The warranting of 156,000 tons of aluminium between the end of June and the middle of August flattered to deceive. Just about all the metal that "arrived" was drawn down from off-warrant stocks in the LME system. Total LME aluminium stocks, registered and off-warrant, have held steady just above the 700,000-ton mark since May. There were over a million tons this time last year. Four years ago there were over three million tons. The stocks games are continuing, judging by the cancellation of almost 100,000 tons earlier this month, but the exchange liquidity pool is much smaller than it once was. ALL EYES ON INDONESIA It is the combination of stalled production growth in the world's largest supplier and low exchange inventory that has got analysts such as Citi reassessing aluminium's outlook over the coming years. Outside of China, primary aluminium production has been in long-term decline, not least due to China's massive exports, long a bone of contention with Western governments. True, U.S. President Donald Trump's decision to hike U.S. import tariffs to 50% may encourage some limited restarts of smelter capacity in the United States. But elsewhere others are struggling to stay afloat in the face of high energy costs. South32 (S32.AX) , opens new tab warned last month that it may close its smelter in Mozambique if it can't secure a viable power contract by the end of next year. New primary supply hopes rest almost exclusively on Indonesia, where Chinese companies are investing in new smelters in a collective off-shoring from capacity-capped China. On paper the project pipeline could deliver seven million tons of new capacity over the second half of this decade. In reality, that's highly unlikely. New aluminium smelters will either have to compete with other sectors for energy supplies or build their own captive power plants. Current pricing makes the latter challenging, according to Citi, which expects Indonesian capacity to reach only 2.3 million tons per year by 2030. CRISIS OF A DIFFERENT KIND That may not be enough to keep up with global demand growth, which is getting a booster from aluminium's usage in energy transition sectors such as solar and electric vehicles. Hence Citi's call for a structural shift to higher pricing over a five-year horizon. The concept of a deficit market is a novelty for the aluminium market. Past crises have been caused by too much rather than too little metal. Back in the 1990s it was the flood of aluminium that poured through the broken Iron Curtain after the collapse of the Soviet Union. This century it's been China's massive over-production that has led to low prices and a string of smelter casualties in the rest of the world. The next aluminium crisis, though, is shaping up to be altogether different. The opinions expressed here are those of the author, a columnist for Reuters. https://www.reuters.com/markets/commodities/aluminiums-years-plenty-are-drawing-close-2025-09-18/

2025-09-18 11:53

Fed chair says rate cut a 'risk-management measure' ANZ expects gold to outperform early in the easing cycle The bull run is still very much in place, analyst says Sept 18 (Reuters) - Gold prices rose on Thursday, buoyed by a softer dollar, after the U.S. Federal Reserve cut interest rates by 25 basis points and signaled a gradual easing path for the rest of the year, boosting the metal's appeal. Spot gold was up 0.2% at $3,667.12 per ounce as of 1144 GMT. Prices hit a record high of $3,707.40 on Wednesday. U.S. gold futures for December delivery fell 0.5% to $3,701.00. Sign up here. The dollar (.DXY) , opens new tab pared recent gains and hovered near a two-month low, making gold less expensive for other currency holders. The benchmark 10-year Treasury yields also fell. "The dollar is resuming its weakness, which has helped to support gold prices ... the rate decision itself was a little bit on the dovish side, because the statement or the dot plots revealed that there will be two more rate cuts to come this year," said Fawad Razaqzada, market analyst at City Index and FOREX.com. The Fed reduced rates by 25 basis points on Wednesday and indicated it will steadily lower borrowing costs for the rest of this year. Fed Chair Jerome Powell characterised the action as a risk-management cut in response to a weakening labor market, and said the Fed was in a "meeting-by-meeting situation" regarding the interest rate outlook. Non-yielding bullion, considered a safe-haven asset during periods of geopolitical and economic uncertainty, tends to perform well in a low interest-rate environment. "(Gold's) bull run is still very much in place and we will very much see record highs likely to persist," independent analyst Ross Norman said. Traders are currently pricing in a 90% chance of another 25-basis point cut at the Fed's next meeting in October, according to the CME Group's FedWatch tool , opens new tab. ANZ expects gold to outperform early in the easing cycle, the bank said in a note on Thursday. "Demand for haven assets amid the challenging geopolitical backdrop is likely to boost investor demand," it said. Elsewhere, spot silver rose 0.5% to $41.84 per ounce, platinum gained 1.9% to $1,390.43, and palladium was down 1% at $1,142.19/oz. https://www.reuters.com/world/india/gold-gains-softer-dollar-after-fed-delivers-rate-cut-2025-09-18/

2025-09-18 11:45

Fed's guidance leads to dollar's initial plunge, then rebound BoE slows pace of QT, skews away from long-dated gilt sales Bank of Norway cuts rates by 25 bps, as expected JPY slips ahead of BOJ decision on Friday NEW YORK, Sept 18 (Reuters) - The U.S. dollar rose against most major currencies on Wednesday, a day after the Federal Reserve delivered an expected rate cut but signaled little urgency to lower borrowing costs quickly in the coming months. The dollar was supported by data that showed the number of Americans filing new applications for unemployment benefits fell last week, reversing the prior week's jump. Sign up here. The dollar’s broad strength pressured the British pound, erasing earlier gains logged after the Bank of England left rates on hold and slowed the pace of its government bond sales. The Fed reduced rates by a quarter point on Wednesday, as expected, with Chair Jerome Powell characterizing the day's policy action as a risk-management cut in response to the weakening labor market, but said the central bank did not need to rush easing. Powell's words fell short of the "unequivocal dovishness that the markets were expecting," Eric Theoret, FX strategist at Scotiabank said. The upbeat economic data on Thursday combined with the heavy selling the dollar had seen at the start of the week was enough to lift the dollar, Theoret said. "I think the balance for the markets was kind of just leaning all to one side and so, it would have taken a lot to break the U.S. dollar even further from here," he said. Analysts were divided on what to make of the Fed messaging. While those at Goldman Sachs said that many hints had pointed to Wednesday's cut being the first among many, their counterparts at ANZ characterized the Fed Chair's commentary as "not at all dovish". The dollar dropped to the lowest since February 2022 at 96.224 against a basket of major peers immediately after the rate decision on Wednesday, but sprang back to trade up 0.4% at 97.347 on Thursday. Meanwhile, the pound initially edged up after the BoE's decision, but gave up those gains to trade 0.6% lower on the day at $1.35515. Sterling had briefly leaped to the highest since July 2 at $1.3726 in the prior session. BoE policymakers voted 7-2 to slow the annual pace at which the central bank unloads the gilts that it purchased from 2009 and 2021 to 70 billion pounds from 100 billion pounds, broadly in line with a Reuters poll median forecast for it to be cut to 67.5 billion. "We think the market is positioned too bearishly on the pound," said Benjamin Ford, researcher at macro research and strategy firm Macro Hive. The euro was 0.2% lower at $1.17893, after retreating from its highest level since June 2021 at $1.19185 on Wednesday in a knee-jerk reaction to the Fed announcement. NORWAY CUTS RATES, YEN SLIPS AHEAD OF BOJ The Norwegian crown fell 0.5% against the dollar after the Norges Bank cut rates 25 basis points to 4.0%, its second cut in three months. The central bank signaled rates could continue to fall. Elsewhere, the dollar was 0.6% firmer against the Japanese yen at 147.88 ahead of the Bank of Japan's policy decision on Friday. The BOJ is widely expected to refrain from hiking rates, although markets price in a quarter-point increase by end-March, with about 50% odds of it happening within this year. The spotlight is on an October 4 vote where the ruling Liberal Democratic Party will elect a new leader to replace outgoing Prime Minister Shigeru Ishiba, who is stepping down following a bruising defeat in upper house elections. Data on Thursday showed that New Zealand's gross domestic product (GDP) fell 0.9% in the second quarter from the previous three months, worse than forecast by analysts and the Reserve Bank of New Zealand. This weighed on the New Zealand dollar , which fell 1.4% as traders added to bets on policy easing by the country's central bank. Cryptocurrency bitcoin was 1.9% higher at $117,837. https://www.reuters.com/world/middle-east/dollar-choppy-investors-parse-fed-outlook-await-boe-decision-2025-09-17/

2025-09-18 11:44

US Fed cuts rates, signals further reductions amid economic concerns Kuwait expects increased oil demand post rate cut, especially from Asia US oil stockpiles fall, but distillate rise pressures prices NEW YORK, Sept 18 (Reuters) - Oil prices eased on Thursday, settling lower as traders remained worried about the U.S. economic outlook a day after the U.S. Federal Reserve cut interest rates for the first time this year. Brent crude futures fell 51 cents, or 0.8%, to settle at $67.44. U.S. West Texas Intermediate (WTI) crude fell 48 cents, or 0.8%, to settle at $63.57. Sign up here. The Fed cut its policy rate by a quarter of a percentage point on Wednesday and indicated it will steadily lower borrowing costs over the rest of the year, responding to signs of weakness in the jobs market. Lower borrowing costs typically boost demand for oil and push prices higher. "They did this now because clearly the economy is slowing down," said Jorge Montepeque, managing director at Onyx Capital Group. "The Federal Reserve is trying to restore growth." The number of Americans filing new applications for unemployment benefits fell last week, reversing the prior week's jump, but the labor market has softened as both the demand for and supply of workers have diminished. U.S. single-family home building plunged to a near 2-1/2-year low in August amid a glut of unsold new houses, suggesting the housing market could remain an economic headwind. Persistent oversupply and soft fuel demand in the U.S., the world's biggest oil consumer, also weighed on the market. U.S. crude oil stockpiles fell sharply last week as net imports dropped to a record low while exports jumped to a near two-year high, data from the Energy Information Administration showed on Wednesday. A rise in U.S. distillate stockpiles (USOILD=ECI) , opens new tab by 4 million barrels, however, against market expectations of a gain of 1 million barrels, raised worries about demand in the world's top oil consumer and pressured prices. DEMAND WORRIES OFFSET SUPPLY CONCERNS In Russia, the world's second biggest producer of crude in 2024 after the U.S., the Finance Ministry announced a new measure to shield the state budget from oil price fluctuations and Western sanctions targeting Russian energy exports. Ukraine said its drones struck a major oil-processing and petrochemical complex and an oil refinery in Russia, part of an intensifying campaign to disrupt Moscow's oil and gas sector. Exxon Mobil (XOM.N) , opens new tab CEO Darren Woods told the Financial Times in an interview that the U.S. oil major has no plans to resume operations in Russia. Anything that keeps Russian barrels out of the international oil market should be bullish for prices. Kuwait's oil minister, Tariq Al-Roumi, however, said he anticipates an increase in oil demand following the U.S. interest rate cut, with a particular rise expected from Asian markets. Kuwait is a member of the Organization of the Petroleum Exporting Countries (OPEC). In Qatar, another member of OPEC, state-owned QatarEnergy hiked the term price for al-Shaheen crude oil loading in November to the highest in eight months. In Germany, the biggest economy in Europe, parliament approved the nation's first annual budget since sweeping reforms to loosen fiscal rules were passed earlier this year, securing record investments to revive the economy while committing to an increase in defense spending. In the Middle East, Israel launched fresh air strikes against Hezbollah military targets in south Lebanon to stop the militant group from rebuilding in the area. https://www.reuters.com/business/energy/oil-edges-lower-traders-weigh-rate-cut-with-worries-over-us-economy-2025-09-18/

2025-09-18 11:42

JAKARTA, Sept 18 (Reuters) - Indonesia's anti-trust agency found that the country's import restrictions on unsubsidised fuel sold by private companies have reduced the options for consumers and have the potential to lead to an unfair competitive environment, it said on Thursday. Shell (SHEL.L) , opens new tab and BP-AKR, the operator of BP's fuel stations, said they have experienced inventory shortages for some gasoline products since late August. Sign up here. Shell has also made operational staffing adjustments across its gas stations. The market share of private fuel distributors, which sell only unsubsidised fuels, is small compared to those controlled by the state-owned Pertamina (PERTM.UL). But the fuel restrictions led to "the loss of consumer choice for non-subsidised fuels and strengthened the domination of Pertamina's market," the anti-trust agency, known locally as the KPPU, said in a statement. The policy may create unfair business competition, in the form of market foreclosures or discrimination, the agency said. It said the periodic evaluation of the policy was important to ensure fair business practices. Restrictions on the sales of subsidised fuel and a corruption probe into Pertamina have triggered a shift in demand towards Shell and BP, putting their own supplies under pressure. A spokesperson for Indonesia's energy ministry could not immediately comment on the KPPU's findings. Bahlil Lahadalia, Indonesia's energy minister, said earlier that private fuel retailers had been granted a 10% increase in import quotas this year compared to last year. He urged the companies to "collaborate" with Pertamina. https://www.reuters.com/sustainability/boards-policy-regulation/indonesia-unsubsidised-fuel-policy-harms-consumers-may-create-unfair-practices-2025-09-18/

2025-09-18 11:36

LONDON, Sept 18 (Reuters) - The Bank of England left rates unchanged on Thursday and said it was slowing the pace of its quantitative tightening programme and skewing sales away from long-dated gilts to minimise the impact on turbulent bond markets. Policymakers voted 7-2 to slow the annual pace at which it unloads the gilts that it purchased from 2009 and 2021 to 70 billion pounds from 100 billion pounds ($136.47 billion), broadly in line with a Reuters poll median forecast a decline to 67.5 billion. Sign up here. Sterling turned slightly negative on the day in steady trading and was last at $1.3625 . The euro edged up to 86.83 pence . Britain's two-year gilt yield fell 2.5 basis points on the day to 3.94% compared to 3.97% earlier on, while longer-dated 30-year yields were 1 bps lower 5.42% , . London's FTSE stock index was last up 0.3% (.FTSE) , opens new tab. COMMENTS: MICHAEL METCALFE, HEAD OF MACRO STRATEGY, STATE STREET MARKETS, LONDON: "In contrast to the Fed, UK inflation is high enough to prevent the BoE going for further insurance cuts. And even with gilts under pressure, they chose to only modestly reduce the pace of quantitative tightening, with only a small nod to selling fewer of their longer dated holdings. "Altogether a robust assertion of central independence and their inflation focus. With online inflation still accelerating in September, this stance doesn’t look set to change anytime soon." MICHAEL FIELD, CHIEF EUROPEAN MARKET STRATEGIST, MORNINGSTAR: "Central banks are always balancing two forces: inflation and the health of the economy. Last month the decision was harder, but with the latest data showing inflation sticky, at close to 4%, this decision was easier to make. "Economic growth is still weak in the UK, but inflation is now close to double the bank's targeted level. Economists believe this is transitory, but cutting rates at this stage would clearly not help inflation in getting back to normalised levels." JAMES ROSSITER, HEAD OF GLOBAL MACRO STRATEGY, TD SECURITIES, LONDON: "We expect another 25 bps interest rate cut in November. The decision to slow the annual pace at which it unloads the gilts purchased from 2009 and 2021 to 70 billion pounds from 100 billion pounds did not surprise us, as there was fairly broad consensus around that figure. The Bank of England has proved to be conservative in its statement, despite speculations that it might change its wording." LALE AKONER, GLOBAL MARKET ANALYST AT ETORO, LONDON: "The Bank of England has decided to keep rates unchanged, highlighting the challenge of weak jobs data and stubborn inflation pressures. Cutting too soon could lead to higher inflation expectations, while holding too long risks slowing growth further. "For everyday investors, this means savings rates are likely to stay steady for now, but mortgages remain expensive with little relief in sight. Government bond yields may stay high and the pound supported as markets scale back bets on rate cuts. In stocks, defensive sectors like consumer staples and utilities could offer stability against sticky inflation and weaker wage growth." KIRSTINE KUNDBY-NIELSEN, FX ANALYST, DANSKE BANK, COPENHAGEN "It was fairly in line with expectations, both the decision and the 7-2 vote split. "There was an absence of hawkishness. They're not closing the door to a November cut, for example, and keeping this careful and gradual approach to easing. "We expect cuts in November and then in February and then on hold from there. The disinflationary process is ongoing, the labour market will continue to weaken and growth will remain subdued. That is going to push them to keep cutting, just a bit more. "With the ECB on hold and the euro area economy faring fairly well, that will push euro-sterling higher." STEVE CALYTON, HEAD OF EQUITY FUNDS, HARGREAVES LANSDOWN: "Markets were pricing in a 98% likelihood that rates would stay at 4.0%, because so far, we are not seeing enough progress in bringing inflation down to give room for manoeuvre on rates. Service prices remain far above the overall 2% target and goods price inflation edged up toward 3% last month. The Bank will be watching employment and growth data closely for now, because it will worry about choking off growth if interest rates stay too high for too long, but for now, its hands look tied." MARION AMIOT, CHIEF UK ECONOMIST AT S&P GLOBAL RATINGS, LONDON: "As expected, the BoE has not cut rates, and it is unlikely it will ease monetary policy again this year. "It’s increasingly clear that firms have been adjusting to the increase in labour costs - driven by the minimum wage increase and higher NIECs, by shedding job as margins are squeezed and productivity has not kept up. Robust wage growth highlights that this is translating into a higher structural unemployment rate and pointing to the risks of higher inflation becoming more entrenched as soon as economic activity accelerates.” LLOYD HARRIS, HEAD OF FIXED INCOME, PREMIER MITON INVESTORS, LONDON: "With five rate cuts already behind us, the Bank of England’s decision to hold today was no surprise. Inflation remains stubborn at 3.8%, and wage growth at 4.7% keeps the pressure on. The UK is now the most stagflationary economy in the developed world. A brutal mix of high inflation, weak growth, and rising unemployment. "This is the kind of environment where central bankers earn their stripes. But they can’t do it alone. Government policy is currently amplifying stagflation, not fighting it. Rising employer costs and tax hikes are feeding inflationary pressures and contributing to a slower economy. "The next big moment for the BoE and for all sterling markets is the Autumn Budget. If tax rises continue, which we expect, our fear is we’ll get more of the same for the BoE to manage." ($1 = 0.7328 pounds) https://www.reuters.com/world/uk/view-bank-england-leave-rates-hold-slows-down-qt-2025-09-18/