Aluminum yesterday rose for a seventh day — to near the highest in a decade — as deepening Chinese output cuts raised fears of a supply shortfall.
The southwestern Chinese province of Guangxi, a major metals producer, would cut output of energy-intensive materials, including aluminum, people familiar with the matter said. That came after the Xinjiang autonomous region started similar curbs last month.
The moves are in response to Beijing’s campaign to save electricity and cut emissions. China produces about 60 percent of the world’s aluminum and the concerns about output prompted some of the country’s largest smelters to hold a video call on Monday in which they pledged to ensure supply, and to avoid malicious speculation and irrational price surges.
Aluminum rose 2 percent to US$2,701.50 a tonne on the London Metal Exchange (LME) as of 12:50pm yesterday in Shanghai. That’s near the intraday peak of US$2,718 in April 2018, which was the highest since May 2011. On a closing basis, the metal is already at the highest in more than 10 years.
Aluminum prices have rallied almost 40 percent this year on the LME, second only to tin among six base metals. Goldman Sachs Group Inc, Citigroup Inc and Trafigura Group are among those forecasting further gains ahead, as the market moves into a deepening deficit just as the global economic recovery gathers steam.
Separately, iron ore futures retreated as the market weighed a coming seasonal pick-up in Chinese demand against the prospect of a broadly weakening economy and more curbs on steel output.
The raw material had been regaining some ground after a collapse in July, with China’s upcoming fall construction season suggesting higher demand.
However, iron ore still faces headwinds as the world’s largest steel market faces several challenges for the rest of this year. Authorities want to rein in output, and production curbs to reduce emissions are expected to intensify in the last quarter.
Even if seasonal demand is expected to emerge soon, “it’s hard to change the weak outlook for the medium and long-term given the overall guidance to lower crude steel production,” Zhongzhou Futures Co (中州期貨) wrote in a Web site note.
Earlier this week, Baoshan Iron & Steel Co (寶山鋼鐵), the listed unit of China’s biggest producer, flagged the potential for renewed price declines in iron ore.
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