LONDON: Aluminium prices fell to their lowest in more than three months on Friday as rising coal output in China eased concerns over supply of the metal from smelters powered by the fossil fuel.
Daily coal output in China, the world's largest producer of aluminium, was close to a record at 11.2 million tonnes on Nov. 3, helped by measures to ramp up production.
A shortage of coal had pushed prices to unprecedented highs, raising the cost of power. Electricity accounts for about 40% of costs in aluminium production.
Aluminium prices in the short are likely to be dictated by production costs and supply-side policies around power rationing, said London-based brokerage Marex.
Benchmark three-month aluminium on the London Metal Exchange (LME) fell as low as $2,510 a tonne, its weakest since July. In official trading, prices fell 1.4% to $2,520.
Prices for the light metal used in automobiles and beverage cans are down about 20% since reaching a 13-year high in mid-October.
"The ongoing fall in coal prices in China amid stronger supply is likely to lower the risk of power shortages ... Not only are the risks of disruptions lower, costs of smelting the metal have also declined significantly," ANZ analysts wrote.
INVENTORIES: On-warrant stocks of aluminium in LME-registered warehouses are near 2019 lows at 621,850 tonnes.
Aluminium stocks in warehouses monitored by the Shanghai Futures Exchange rose 6.8% from last Friday to 307,005 tonnes.
RUSSIA EXPORTS: Expectations that Russia will remove taxes on aluminium exports and boost global supplies have triggered an inventory sell-off, reducing prices in the physical market in Europe and the United States.
OTHER METALS: LME copper shed 0.2% to $9,425 a tonne, zinc lost 2% to $3,177, lead rose 0.5% to $2,360.50, tin was up 1.2% at $36,900 and nickel gained 0.3% to $19,200.
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