LONDON: Aluminium prices rose to 13-1/2 year highs on Wednesday as a supply shortfall caused by smelter closures in Europe and China ate further into exchange stockpiles.
Other industrial metals also gained as investors bought up risk assets, with global equities rising strongly.
Benchmark aluminium on the London Metal Exchange (LME) was up 2.5% at $3,263 a tonne at 1740 GMT having reached $3,272, the highest since July 2008.
Prices are up around 16% this year after rising 42% in 2021 and are closing in on 2008’s record of $3,380.15 a tonne.
Aluminium smelters have cut output due to high energy prices and a crackdown on polluting industry in China, where power-hungry aluminium plants use electricity generated using coal.
The roughly 65 million tonne a year market was undersupplied by just over a million tonnes in 2021 and could see a 1.5-1.6 million tonne deficit this year, said independent analyst Robin Bhar.
“At a time when demand is building, we’re not seeing the supply to meet it,” he said.
A COVID-19 outbreak in the aluminium-producing Chinese city of Baise has fanned supply fears.
“The Baise local government’s stringent lockdown measures have led to disruptions to logistics affecting both alumina and aluminium productions,” ING analyst Wenyu Yao wrote in a note.
ALUMINA: The COMEX exchange price of the material used to make aluminium has increased by 8% since Jan. 31 to $382 a tonne.
INVENTORIES: Aluminium stocks in LME-registered warehouses have fallen to 761,950 tonnes, the lowest since 2007 and down from almost 2 million tonnes last March.
Inventories in Shanghai Futures Exchange (ShFE) warehouses are down 17.5% this year to 266,906 tonnes.
COSTS: Energy prices have surged, hitting smelters for which power typically accounts for around 30-40% of production costs.
Worst hit is Europe, where more than 1 million tonnes of output has been cut, analysts at ANZ say.
BULLISH: Goldman Sachs on Tuesday raised its aluminium price forecasts with a new 12-month target of $4,000 per tonne and said it sees prices averaging $3,450 in 2022.
BEARISH: However, the median forecasts from a Reuters poll last month were for a deficit of 609,000 tonnes this year and for cash aluminium to average $2,780 a tonne.
OTHER METALS: LME copper was up 3% at $10,073.50 a tonne, zinc rose 1.8% to $3,656, lead climbed 2.6% to $2,262, tin was up 0.5% at $43,155 and nickel added 2.4% to $23,245.