Aluminium advances on China supply fears

LONDON: Aluminium prices resumed their climb on Wednesday, with the London metal within striking distance of a 13-year high on supply concerns triggered by production disruptions in top producer China.

China's aluminium and alumina hub Guangxi was going ahead with measures reported last week requiring smelters to keep September output at a maximum of 80% of average monthly levels in the first half of 2021, and alumina refineries to stay within 50%, according to consultancy Aladdiny.

China aims to lower its carbon output by restricting the electricity consumption and production of power-intensive industries such as aluminium smelting.

Power constraints faced by smelters in China are part of a long list of issues in the aluminium supply chain including a coup in major bauxite producer Guinea and a fire at the alumina operations of Noble in Jamaica, among others.

Aluminium rises to 10-year high as supply fears grow

"If China is serious about good environmental outcomes and decarbonisation, then (aluminium) output will be slower," said WisdomTree analyst Nitesh Shah.

He said supply constraints in aluminium were exacerbated by the coup in Guinea, which is China's top source of bauxite, a raw ingredient of aluminium.

Three-month aluminium on the London Metal Exchange climbed 1.3% to $2,793 a tonne in official trading. This was its highest since May 2011 and the contract is now close to highs touched in 2008.

In Shanghai, the metal hit a more than 13-year high of 22,075 yuan ($3,416.18) a tonne.

Backlogs: Imports shipment backlogs ahead of the Oct. 1-7 holiday in China added to tight supply, with aluminium inventories in ShFE warehouses at their lowest since December 2020 of 232,245 tonnes.

Inventories: On-warrant LME inventories of aluminium MALSTX-TOTAL>, those not earmarked for delivery, at 854,725 tonnes, were near their lowest since March 2020.

Warrants: One party has control of 50%-80% of LME inventories, data showed on Wednesday.

Other Metals: LME copper fell 0.8% to $9,280 a tonne, zinc rose 0.7% to $3,064, lead added 0.3% to $2,280, tin was up 1.1% to $32,459 while nickel climbed 1.1% to $19,710.