LONDON: Aluminium prices rose on Tuesday as the cost of raw material alumina set a record high, increasing production costs.
Three-month aluminium on the London Metal Exchange (LME) was up 1.8% at $2,640 per metric ton by 1025 GMT, outperforming the rest of the base metals complex.
The rally was supported by a surge in the price of alumina, or aluminium oxide, a form of refined ores used for making primary aluminium.
The most traded front-month alumina contract on the Shanghai Futures Exchange (ShFE) hit an all-time high of 5,003 yuan on Tuesday, before closing 2.9% higher at 4,933 yuan.
It has gained 18% since the beginning of October.
The rally prompted ShFE to widen the trading band to 9% from 8% on Tuesday, the second change in the past two weeks.
Aluminium rises on Guinea raw material supply concerns
Alumina prices are not only being driven by speculating funds, fundamentals remain strong and room for correction could be limited, a trader said.
Alumina supply tightened with a shortage of bauxite due to disruptions in Australia and Guinea. Bauxite is the raw ore that can be refined into alumina.
Chinese alumina consumption also has been strong this month as aluminium producers ramped up output.
For other metals, copper prices rose 0.8% to $9,632 after inventory in warehouses monitored by the London Metal Exchange dropped to a 77-day low of 280,100 tons.
China said its refined copper output in September remained stable at 1.14 million tons.
Nickel eased 0.6% to $16,600, zinc climbed 1.5% to $3,122, lead was 1% higher at $2,077, and tin was down 0.5% at $30,875.
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