LONDON: Aluminium prices rose on Wednesday to their highest in nearly three years on worries about supplies from top producer China, where authorities are clamping down on energy-intensive industries to curb carbon emissions.
Benchmark aluminium on the London Metal Exchange (LME) was up 1.5% at $2,328 a tonne at 1556 GMT. This is the highest price since June 2018 and more than 15% up from the start of this year.
“People are worrying about aluminium capacity after Inner Mongolia announced plans to cut energy consumption,” said ING analyst Wenyu Yao, adding that if others followed, capacity would be severely constrained at a time of strong demand growth.
The Chinese city of Baotou in Inner Mongolia recently ordered some industrial production and power plants to shut down in an effort to meet energy consumption targets for the first quarter.
Chinese cities and regions are under pressure to rein in energy usage as China aims to reach a peak in carbon emissions before 2030.
Energy can account for 30%-40% of aluminium smelting costs.
Analysts at Citi expect aluminium demand to rise 6.4% this year to nearly 68 million tonnes and 4.6% in 2022 to nearly 71 million tonnes. They expect a surplus of 720,000 tonnes this year and a deficit of 590,000 tonnes in 2022.
“We see increasing disruption risks to China’s aluminium output even before the country reaches the 45 million tonnes a year effective capacity ceiling,” they said.
Aluminium is widely used in the transport, packaging and construction industries.
Aluminium prices on the Shanghai Futures Exchange rose to their highest since August 2011.
Industrial metals overall were supported by a weaker US currency, which makes dollar-priced metals cheaper for buyers with other currencies.
Copper rose 2.1% to $9,087 a tonne, zinc advanced 1.5% to $2,827, lead was up 0.7% at $2,000, tin rose 1.8% to $26,100 and nickel was up 1.4% at $16,390.
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