Shortages help aluminium towards 13-year highs

Shortages help aluminium towards 13-year highs
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LONDON (Oct 4): Aluminium prices climbed towards 13-year highs on Monday, boosted by strong demand and large shortages created by China imposing production curbs on high-polluting industries such as smelting to cut power use and emissions.

Benchmark aluminium on the London Metal Exchange traded up 1.8% at US$2,908 a tonne in official rings. Prices of the metal used in the transport and packaging industries last month hit US$3,000 a tonne, the highest since July 2008.

A widespread power shortage in China has raised concerns of slower growth and demand, as the government has focused on limiting use by energy-intensive industries to lessen the impact on households.

Aluminium smelters can account for up to 7% of China's overall energy consumption, analysts say, and up to 40% of the metal's production costs in China could be accounted for by power.

"The aluminium story isn't over yet by any means, consumption may be slowing in China, but the rest of the world is still in deficit," a fund manager said.

DATA: China's import and export data later this week will be closely watched for clues to growth and demand for base metals.

"Headwinds to China's demand have been pronounced year-to-date over car production, construction activity and more recently tight power markets," said BoA Securities analyst Michael Widmer.

"The fundamental backdrop may remain subdued until auto, property and power issues normalise, although this may not happen until 2022."

INVENTORIES: Supported by low stocks, copper prices were up 1.5% at US$9,265 a tonne.

In warehouses monitored by the Shanghai Futures Exchange, stocks at 43,525 tonnes are at their lowest since June 2009, while inventories in LME registered warehouses at 216,725 tonnes, have fallen more than 10% over the last month.

Falling stocks and large holdings of copper warrants have reinforced worries about supplies on the LME market.

This has created a premium for the cash over the three-month contract. The premium traded at US$7 a tonne on Friday.

OTHER METALS: Zinc was up 1.4% at US$3,023, lead added 0.6% to US$2,153, tin rose 1.5% to US$34,350 and nickel gained 0.7% to US$18,100.