Shanghai aluminium hit its highest level in more than nine months on Tuesday, tracking gains in London in the previous session, on worries over supply disruption in top producer China.
The most-traded aluminium contract on the Shanghai Futures Exchange (ShFE) advanced as much as 1.2% to 14,455 yuan ($2,047.16) a tonne, its highest since October 2018.
“A power disruption at a northwest China aluminium smelter caused 500,000-tonne-per-year of production to be completely halted,” metals consultants CRU said in a note to clients.
The amount of the smelter’s capacity shut down is equal to 1.4% of total aluminium production last year in China, the world’s biggest maker of the metal.
ShFE aluminium eased later in the session to end up 0.4%, while three-month aluminium on the London Metal Exchange rose 0.1% to $1,795 a tonne by 0704 GMT, after touching its highest in more than two weeks in the previous session.
“Lasting time period is a key concern now as it will determine how much actual output loss will happen. Market rumoured (it’ll last) three to five months, while no one can be sure now,” said an analyst.
“(Impact on prices) could be longer than a week if it cannot resume soon,” the analyst added.
FUNDAMENTALS
* ALUMINIUM: Besides the smelter shutdown, investors have been concerned about potential supply disruption at China Hongqiao Group, the world’s biggest aluminium producer, after its facility was flooded last week, despite the company saying it was operating as normal.
* OPEN INTEREST: Open interest of Shanghai’s most active aluminium contract surged to its highest in 17 months, indicating solid liquidity of the contract.
* ALUMINIUM STOCKS: Aluminium inventories in warehouses tracked by the Shanghai Futures Exchange AL-STX-SGH fell to their lowest since April 2017 at 387,663 tonnes, while LME inventories fell to their lowest since July 23. MAL-STX-TOTAL
* CHINA ALUMINIUM OUTPUT: China produced 35.8 million tonnes of aluminium last year, while output was 20.49 million tonnes in the first seven months of 2019, up 1.6% from the same period a year earlier, official data showed.
* BHP: Top global miner BHP Group said on Tuesday the U.S.-China trade war is not yet affecting demand for its commodities including copper.
* PRICES: LME copper eased 0.1%, nickel fell 0.6%, zinc decreased 0.4% while tin edged down 0.3%. In Shanghai, copper rose 0.3%, nickel fell 2% while lead advanced 1.5%.
