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Aluminium prices lifted to 10-year high by China concern

London aluminium hits 10-year high on supply concerns
London aluminium hits 10-year high on supply concerns   -   Copyright  Thomson Reuters 2021
By Reuters

By Zandi Shabalala

LONDON -Aluminium prices hit their highest level in more than 10 years on Tuesday as smelters in top producer China faced tougher power controls, stoking supply worries for the energy-intensive metal.

The government in China’s Guangxi region, an aluminium and alumina production hub, called on Monday for tougher controls on energy consumption in a statement issued after a teleconference.

The region is China’s third-biggest producer of alumina, a primary product of aluminium, with output of 925,500 tonnes in July, according to the National Bureau of Statistics.

Aluminium prices have been supported by production curbs in Chinese smelting regions often aimed at easing the strain on the power grid.

A stream of announcements from China about the challenges faced by smelters, combined with soaring global demand have buttressed prices, Wood Mackenzie analyst Uday Patel said.

China’s production would still rise this year compared to last, albeit at a slower pace, he said, adding that its output is about 500,000-600,000 tonnes lower than expected at the start of 2021.

Meanwhile, Consultancy Mysteel said eight aluminium smelting companies in Guangxi will have to keep their September production at a maximum of 80% of their average monthly output in the first half of the year.

That could equate to a reduction in annual operating capacity of 475,000 tonnes, it said.

Benchmark three-month aluminium climbed 1.8% to $2,696 a tonnes by 1210 GMT, after touching its highest since May 2011.

The most-traded October aluminium contract on the Shanghai Futures Exchange closed up 1.2% at 21,390 yuan ($3,311) a tonne, hovering near its highest since August 2008 of 21,550 yuan a tonne hit in the previous session.

SPREADS: The LME cash aluminium contract was trading at a premium of $15 a tonne to the three-month contract, indicating tightening nearby supplies.

DOMINANTPOSITION: Exacerbating the tight situation was a large position accounting for 50-80% of available inventories, according to LME data.

OTHERPRICES: LME copper increased 0.8% to $9,485 a tonne, zinc rose 0.2% to $3,010, lead shed 0.8% to $2,277, tin climbed 1.5% to $34,100 while nickel advanced 2.5% to $19,500 a tonne.