LONDON: Aluminium rebounded from two-month lows on Thursday as traders refocused on the impact that power restrictions in China will have on energy-intensive smelters producing the metal. Prices plunged on Wednesday after China's state planner said it would step in to cool soaring prices for coal, which powers aluminium smelters, during a severe power crunch. Energy accounts for about 40% of aluminium smelter costs. China's state planner has set an immediate price target for thermal coal in its most direct intervention yet to cool the market for the key power-generating fuel, sources told Reuters.

Although coal prices have since fallen from recent record highs, the aluminium market is still tight on supplies. "Nothing has changed in terms of fundamentals for aluminium; these power restrictions still remain in place and the risk to supply is still there," said ING analyst Wenyu Yao, adding that prices on Wednesday fell by more than they should have.

Benchmark aluminium on the London Metal Exchange (LME) was up 1.8% at $2,732 a tonne at 1602 GMT after touching its lowest in two months at $2,602. The global supply of aluminium will remain tight, said analysts at Commerzbank, citing pressure on smelter margins in China and warnings by major producers Norsk Hydro and Rusal of continued shortages.

"We therefore expect higher prices again in the near future and view the current lower prices as a hedging opportunity for consumers," they said.

CHINA OUTPUT: Aluminium output in China, the world's top producer, declined for a fifth consecutive month in September.

STOCKS: On-warrant inventories of aluminium available to the market in LME-registered warehouses eased to 625,350 tonnes, near its lowest since 2018.

OTHER METALS: LME copper rose 1.1% to $9,658 a tonne, zinc added 0.6% to $3,354, lead rose 1.6% to $2,424, tin was up 0.5% at $35,570 and nickel gained 0.9% to $19,590.