LONDON: Aluminium prices climbed to the highest in over three years on concern about reduced supplies in top producer China after more power cuts in the key metal-producing province of Yunnan.
Three-month aluminium on the London Metal Exchange had gained 1.3% to $2,625 a tonne by 1020 GMT, its highest since April 2018 and on track for its sixth straight monthly gain.
Aluminium producers in Yunnan province received a notice from local authorities this week to restrict their power consumption, and one smelter was set to miss its 2021 output target due to the power cuts.
“In the near term the power constraints in Yunnan are continuing longer than had been expected. Previously we thought normal production would start to resume in August, but now it will take a bit longer,” said Xiao Fu, head of commodity market strategy at Bank of China International in London.
“There’s also medium and longer-term support from power constraints, because China is quite serious regarding its carbon neutral target. The aluminium industry needs to shift towards renewable energy, but it’s not always so easy and the costs will be higher.”
In China, aluminium prices were hovering near an 11-year high, with the most-traded September aluminium contract on the Shanghai Futures Exchange closing up 2.6% at 20,085 yuan ($3,108.94) a tonne, near a January 2010 high of 20,530 per tonne.
Zinc also got support from the power cuts because China’s southwest Yunnan province is also home to several major zinc smelters. LME zinc advanced 0.8% to $3,022 a tonne.
Aluminium inventories in ShFE warehouses were last registered at 256,214 tonnes, their lowest level since January. Stockpiles of the metal in LME warehouses have dropped by nearly a third since March to 1.39 million tonnes.
The premium of LME cash aluminium over the three-month contract stretched to $17.65 a tonne, the biggest since December 2019, indicating tightening nearby supplies.
LME copper fell 0.4% to $9,785 a tonne, nickel shed 0.2% to $19,795, tin dropped 0.3% to $34,810, while lead added 0.5% to $2,377.50.
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