LONDON: Aluminium prices advanced on Wednesday after news that a European smelter will close due to high power prices, boosting worries about potential shortages.

Benchmark aluminium on the London Metal Exchange gained 0.9% to $2,413 a tonne by 1000 GMT.

Aluminium, the most energy-intensive metal to produce, has eased in recent months along with other industrial metals due to disquiet about a global downturn hitting demand.

It has shed 40% since touching a record high in early March.

Norsk Hydro said on Wednesday it will close its majority-owned primary aluminium facility in Slovakia by the end of September because of high electricity prices.

“This smelter news and the potential impact on supply is keeping prices supported even though there are still worries about the demand outlook,” said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.

“This development highlights the fact that this market is not only demand driven, but supply driven and increasingly challenged by these punitively high energy prices.”

Aluminium pulls back on concern about Chinese construction demand

In China, the most-traded aluminium contract on the Shanghai Futures Exchange rose as much as 4.3% in its biggest gain since October 2021, before easing slightly to trade 3.75% higher at 18,660 yuan a tonne.

Power controls in China amid its worst heatwave in 60 years have also sparked concerns over metal supply in the world’s top producer.

The southwestern Sichuan province ordered industrial users to suspend production from Aug. 15 until Aug. 20 to prioritise residential power supply, disrupting metal production including lithium, aluminium and zinc.

Aluminium production in neighbouring city Chongqing has also been affected. But market participants estimated a limited impact for now as it is not a major metal producing region.

LME three month copper eased 0.2% to $7963 a tonne, zinc lost 1.9% to $3,601.50 and lead fell 0.4% to $2,155.50, but nickel climbed 0.5% to $22,335 and tin gained 0.5% to $24,725.