Aluminium muscles higher on weak China supply, US shortages

18 Aug, 2021

LONDON: Aluminium prices pushed higher on Tuesday on renewed supply worries over power issues in top producer China, and shortages in the United States due to shipping delays.

Shanghai prices touched a 13-year high, while the benchmark contract in London was in spitting

distance of the strongest level in more than three years, though it pared gains after weak US retail sales data.

China will curb development of projects that use large amounts of energy and have high carbon emissions, the state planner said on Tuesday, a day after data showed China's aluminium output slipped for a third month in July.

"There's a combination of different factors that will keep aluminium prices elevated and it's unlikely to be resolved very quickly," said Xiao Fu, head of commodity market strategy at Bank of China International in London.

"There are a lot of supply challenges in China in terms of summer power rationing and emission targets, while stocks in the US have been quite low due to shipping disruptions."

Three-month aluminium on the London Metal Exchange was the only metal in positive territory, ticking up 0.2% to $2,606.50 a tonne by 1410 GMT, after touching $2,638, close to a peak not seen since April 2018.

The most-traded September aluminium contract on the Shanghai Futures Exchange climbed as much as 1.6% to 20,575 yuan ($3,174.47) a tonne, its highest since August 2008.

Physical aluminium premiums in the United States have more than doubled to record highs due to shortages. LME aluminium stocks in the United States are a paltry 39,950 tonnes, making up 3% of the total 1.31 million tonnes.

Average prices for aluminium raw material alumina in China were last assessed at 2,644 yuan per tonne, the highest since July 2019, due to a lack of input material bauxite.

Risk-off sentiment gained momentum after US retail sales fell more than expected in July, weighing on stock markets and base metals.

LME copper eased 1.7% to $9,285 a tonne, zinc dropped 1% to $3,002 a tonne, lead slipped 0.2% to $2,306, nickel slumped 1.7% to $19,180 while tin dipped 0.2% to $35,600.

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