Drop in crude oil prices affects aluminium prices

The falling oil prices have signaled a fall in aluminium prices as well, which has fallen the most in a week.

Since aluminium is an energy intensive industry, the falling price of fuel significantly affects the cost of production, thereby affecting the price. Even though crude oil is not the primary source of energy for aluminium production, the fact that energy costs accounts for nearly 30 percent of the total cost of production, the falling oil prices may have a deflationary impact.

“The entire commodity complex is having a reaction to crude and the U.S. dollar strength,” Bart Melek, the head of commodity strategy at TD Securities in Toronto, said by e-mail. “There is that potential on the headlines and less Petro dollars available to invest in the commodity space.”

The London Metal Exchange prices for three-month delivery aluminium fell 0.8 percent to $2,044 per metric ton, which is the lowest it has been since November 18.

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