LONDON: Aluminium prices rose to their highest in almost 20 days on Wednesday as news of alumina shortages triggered systematic buying from funds.
Three-month aluminium on the London Metal Exchange (LME) rose 0.5% to $2,646 a metric ton in official rings after touching its highest since Oct. 3 at $2,684.
“Alumina’s sharp rally onshore and particularly since early September has shifted the narrative on aluminium,” said Alastair Munro, senior metals strategist at brokerage Marex.
Prices of alumina, the main ingredient for making primary aluminium, have rallied 17% in China this month due to upstream disruptions in Australia and Guinea.
The most traded front-month alumina contract on the Shanghai Futures Exchange closed at 4,937 yuan after hitting a record high of 5,003 yuan in the previous session.
With input costs rising, Munro had seen more aluminium buying by funds known as commodity trading advisors (CTAs), largely driven by computer programmes.
Aluminium rallies on record high raw material prices
But questions remain over whether demand for aluminium, widely used in carmaking and packaging, is solid enough to keep prices at these levels.
“Aluminium consumers having been living on a hand-to-mouth basis amid a higher cost to hold inventory and particularly given future demand uncertainty,” Munro added.
Also noteworthy are large position holders, which could spur price volatility.
LME data showed one large futures position at more than 40% of open interest to buy aluminium in December and a large position of 30-39% of open interest to sell in January.
More broadly, the metals complex has come under pressure from a rising U.S. dollar, making dollar-priced metals more costly for buyers with foreign currencies.
In other metals, copper lost 0.8% to $9,509 a ton, nickel was down 1.2% at $16,125, zinc eased by 0.3% to $3,129.50, lead fell 0.7% to $2,055 and tin was up 0.4% at $31,015.
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