Aluminium rises to 10-year high as supply fears grow

LONDON: Aluminium prices were driven to a 10-year high on Thursday by growing concern that restrictions on the production of the metal in China are causing supply shortages.

Benchmark aluminium on the London Metal Exchange (LME) was up 0.6% at $2,705.50 a tonne at 1108 GMT after touching a peak of $2,734.50, its highest since May 2011.

Lower Chinese output is transforming a market that was amply supplied for years, said independent analyst Robin Bhar.

"We're seeing inventories coming down to try to fill the gap between supply and demand," he said, predicting that prices would rise above $3,000.

China output: More than 2 million tonnes of China's annual aluminium capacity -- 6% of the total -- has been shut down in China this year and that number could rise, said research house Antaike.

China produces more than half the world's supply of primary aluminium. Several local governments have restricted aluminium makers' electricity consumption or metal production because of tight power supplies and pressure to reduce pollution.

Aluminium prices lifted to 10-year high by China concern

However, Chinese aluminium industry executives said this week that there had been "no obvious gap" between supply and demand and the China Nonferrous Metals Industry Association (CNIA) called the price rally "irrational".

Column: China is battling with aluminium's decarbonisation paradox, writes Reuters columnist Andy Home.

Alumina: Prices of alumina used to make aluminium have surged to a two-year high on the Comex exchange.

Stocks: Aluminium inventories in LME-registered warehouses have fallen from almost 2 million tonnes in March to a little more than 1.3 million tonnes.

Spread: Cash aluminium has been trading at a premium to the three-month contract on the LME, signalling tight supply. This premium has fallen to about $5 from around $20 earlier this week.

Markets: Record-high global equities slowed their charge on Thursday as concerns grew over China's economic outlook.

Other Metals: Benchmark LME copper was down 0.1% at $9,329.50 a tonne, zinc rose 0.4% to $2,993.50, nickel eased by 0.1% to $19,310, lead firmed by 0.9% to $2,294.50 and tin was unchanged at $33,550.