LONDON: Aluminium prices on the London Metal Exchange (LME) on Thursday hit a three-week high, driven by expectations of solid demand and signs of tighter supply.

Benchmark three-month aluminium was up 1.3% at $1,806 a tonne at 1608 GMT after touching $1,808, the highest since Sept. 15.

The metal, used in packaging and transport, has rebounded from a low of $1,455 in April, when the novel coronavirus spread globally, but prices are slightly below January's highs.

"There is better demand coming through, and a bit more optimism," independent analyst Robin Bhar said, adding that although the market was oversupplied, the surplus was being locked up in financing deals, leaving room for further rises.

CLOSED: Chinese markets are closed until Friday for a week-long national holiday, reducing trading activity.

SPREADS: The discount of cash aluminium against the three-month contract on the LME touched $12.80, the lowest since March, from $37 a week ago, pointing to tighter nearby supply.

Aluminium for Friday delivery traded as much as $9 above metal for Monday delivery, the biggest 'tom-next' spread since July.

STOCKS: On-warrant aluminium in LME-registered warehouses at 1.1 million tonnes are down from almost 1.5 million tonnes in June but above typical levels for 2018 and 2019 of around 800,000 tonnes.

OUTPUT: Swedish aluminium producer Granges said it expected third-quarter operating profit and sales volumes to exceed market expectations.

COLUMN: China's aluminium import boom heralds a deeper rift in the market, writes Andy Home.

POSITIONING: Speculators hold roughly equal bets on higher and lower aluminium prices on the LME, brokers Marex Spectron said.

GERMANY: German exports rose for the fourth month running and by more than expected in August.

MARKETS: Equities markets gained.

OTHER METALS: LME copper was up 0.1% at $6,683 a tonne, zinc rose 0.9% to $2,377.50, nickel gained 0.4% to $14,665, tin was up 0.1% at $18,135 and lead was down 0.5% to $1,794.