Aluminium hits highest in almost 2 years on supply concerns

LONDON: Aluminium prices hit the highest level in almost two-years on Tuesday and were heading for the biggest daily growth in 16 months due to concerns about raw material supply and copper hovering near the previous session’s record high.

Three-month aluminium on the London Metal Exchange (LME) was up 3.9% to $2,733.50 a metric ton by 1518 GMT after hitting $2,765.50 for its highest since early June 2022.

“Aluminium tends to lag copper when a sizable base metals rally gets going, but fund money eventually finds it,” said Marex consultant Edward Meir.

Copper, used in power and construction, hit a record $11,104.50 on Monday as a rally triggered by short covering created momentum for speculators and funds to bet on a potential long-term shortage of the metal in the transition to green energy.

Aluminium, used in the power, construction and transport industries, was also buoyed by supply worries after Rio Tinto declared force majeure on third-party contracts for alumina exports from its refineries in Queensland, Australia.

Alumina is an intermediary product between bauxite and aluminium.

“Other alumina producers may have trouble stepping into the breach so quickly and we therefore could see additional gains in both alumina and aluminium prices over the days ahead,” Meir said.

There is, however, “no shortage of bauxite whatsoever and so the alumina feed is certainly there,” he added.

A drop in on-warrant aluminium stocks in LME-registered warehouses to a two-week low of 556,100 tons after 82,000 tons of cancellations provided further support to prices. LME copper was last up 0.2% to $10,914 a ton.

“Given the scale of the speculative-driven move in copper, prices are becoming increasingly detached from the near-term fundamentals,” said Warren Patterson, head of commodities strategy at ING.

Demand in top metals consumer China remains soft, with copper inventories in warehouses monitored by the Shanghai Futures Exchange at seasonal record highs and Chinese refined copper output rising despite low treatment charges (TCs), he added.

In other metals, zinc was up 1.7% to $3,167.50 a ton after hitting $3,185 for its highest since February 2023, lead added 0.2% to $2,342.50, tin fell 0.3% to $34,350 and nickel lost 1.4% to $21,300.