LONDON: Aluminium prices soared to their highest level in more than three years on Friday as worries about supplies from top producer China escalated after the country’s Xinjiang region imposed output limits on five smelters.
Benchmark aluminium was up 0.8% at $2,641 a tonne at 1553 GMT. Earlier in the session, prices of the metals used in transport and packaging touched $2,697, their highest since April 2018, after the United States imposed sanctions on Rusal .
“It’s all to do with China and output curbs, which are mostly to do with cutting emissions, unusual in the summer months,” an aluminium trader said.
CHINA: The monthly limits across the five smelters in Xinjiang represent a 10% output cut from levels in the first seven months of this year, according to Reuters calculations.
Xinjiang is a major smelting hub in China, accounting for almost one-fifth of supply in the world’s biggest producer and consumer of aluminium.
Aluminium prices on the Shanghai Futures Exchange (ShFE) jumped to their highest since August 2008.
RESERVES: China’s National Food and Strategic Reserves Administration said in three separate notices it would auction 30,000 tonnes of copper, 50,000 tonnes of zinc and 70,000 tonnes of aluminium on Sept. 1. The sale of 70,000 tonnes of aluminium will take the total to 210,000 tonnes this year, a fraction of the global market estimated at more than 68 million tonnes this year.
IMPORTS: Curbs on smelters’ electricity usage in some regions are reducing domestic aluminium supply in China, underpinning imports that were up 47% year-on-year in the first seven months of 2021.
FED: The dollar slipped after Federal Reserve Chair Jerome Powell signalled the US central bank will remain patient as it tries to nurse the economy back to full employment. This boosted industrial metals overall as a falling US currency makes dollar-denominated commodities cheaper for holders of other currencies, which could boost demand.