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Aluminum set to outperform other metals next year

Aluminum prices will outperform other base metals next year to reach a record as supplies will be constrained by energy shortages amid rising demand from China, the world’s largest consumer, Barclays Capital said.

Aluminum futures in London could rise to average US$4,500 a tonne next year, Gayle Berry, an analyst at Barclays Capital, said at a conference in Beijing yesterday.

Aluminum, used in the production of automobiles and aircraft, has risen 28 percent so far this year, averaging US$2,818 a tonne and nearing a record of US$3,310 reached in May 2006.

Prices of other industrial metals such as copper, while remaining high, will stay below historical peaks, Berry said.

“Aluminum has been the most affected by energy-related supply losses” as it is the most power-intensive to produce, Berry said.

Production loss of the lightweight metal because of power shortages from Africa, China and the rest of the world has amounted to 721,000 tonnes, or 2 percent of last year’s total output, she said.

Aluminum production growth has peaked in China, which is set to become a net importer of the metal this year, weighing on future expansion in global supply, Berry said.

Increasing tightness in the global market will result in a global deficit next year, she said. Copper, lead and zinc production were also cut in China and Africa because of energy shortages, Berry said.

“It does highlight China is not only a demand story, but also a potential supply side risk,” he said.

In China, which accounted for 94 percent of global consumption growth for the metal last year, environmental and safety concerns have led to closures of small coal mines and exacerbated a shortage of the commodity on which China depends for over 80 percent of power generation.


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