LONDON: Aluminium prices rose on Wednesday as smelter closures reduced supply, but analysts said that any rally is likely to be curtailed by a looming economic slowdown and its effect on metals demand.

A smelter in Slovakia last week became the latest in Europe to announce a closure because of high energy costs, and Bloomberg News reported on Wednesday that a German smelter is also considering cutbacks.

Authorities in China’s Sichuan province, meanwhile, have ordered the temporary shutdown of smelters that can produce about 1 million tonnes a year, citing a recent drought and heatwave, said Julius Baer analyst Carsten Menke.

But weakening economic data, rising interest rates and inflation have turned investors cautious, pushing down global equities and holding the dollar near 20-year highs.

Benchmark aluminium on the London Metal Exchange (LME) was up 0.3% at $2,430 a tonne by 1610 GMT.

Prices of the metal used in transport, packaging and construction have largely flatlined in recent weeks after falling 40% from their March peak as the global economy stalled.

“The past week has seen rising supply disruptions but aluminium has appeared unfazed,” Citi analysts said, predicting prices would stay around $2,400 over the next three months.

“Industrial metal prices are at fair levels,” said Menke. “A rapid rebound looks unlikely amid prevailing economic uncertainties.” About 1 million tonnes of aluminium capacity has been taken offline in Europe, Citi said, while another 500,000 tonnes in Europe and 200,000-300,000 in the United States are under threat. About 65-70 million tonnes of aluminium are produced each year.

However, Citi said there was still surplus supply in Asia.

Supply on the LME does appear to be tightening. LME inventories have fallen below 300,000 tonnes from almost 2 million tonnes in March 2021 and traders are paying a premium for quickly deliverable cash aluminium.

LME copper was down 0.9% at $8,046.50 a tonne, zinc rose 1.1% to $3,524, nickel slipped 1.8% to $21,350, lead eased by 0.3% to $1,969.50 and tin was down 0.8% at $24,310.