Aluminium hits US$3,000 for first time in 13 years on supply snarl

London

ALUMINIUM reached US$3,000 a ton in London for the first time in 13 years amid expectations that supply disruptions are here to stay, while demand keeps rising.

The metal kept climbing on Monday after advancing 15 per cent over the last three weeks. Chinese output is down amid drives to reduce emissions and conserve power, while a coup in bauxite producer Guinea has raised concerns over the supply of the material used in aluminum production. Smelters in the European Union are also facing rising costs with both carbon credit and power inputs at record highs, Goldman Sachs Group Inc said.

"In China and increasingly in the EU, policy risk to aluminium supply is growing," Goldman analysts including Jeff Currie said in a note released on Monday. While the bank doesn't see the recent coup in Guinea as materially impacting bauxite, upside risks remain as regional tensions could generate further logistical bottlenecks, they said.

Snarled supplies will dog the industry through the rest of this year and most of 2022, according to many participants at the Harbor Aluminum Summit in Chicago, with some projecting it could take as long as five years to resolve the issues. The energy-intensive metal has risen by around two-thirds over the past year.

Aluminium climbed as much as 2.6 per cent to US$3,000 a ton, the highest intraday level since 2008, on the London Metal Exchange. It traded at US$2,992.50 as at 7:09 am in London. In China, the metal surged as much as 5.4 per cent to 23,790 yuan (S$4,951), the highest since 2006.

Aluminum Corp of China Ltd, the country's largest smelter, surged as much as 12 per cent in Hong Kong on Monday. Chinese material equities may see a further re-rating as more government moves to curb steel production to cut emissions could boost prices for cement, steel and aluminum, Citigroup Inc analyst Jack Shang said in a note. BLOOMBERG