Why huge rally in aluminium prices may have further to run

London

IN a stellar year for base metals, aluminium has led the pack. Now, producers say surging raw material costs could drive prices even higher.

Alumina, the raw material used to make aluminium, has jumped 56 per cent since August after China shut down some production, triggering a wave of buying by traders and aluminium smelters.

The rally is putting a strain on metal producers in China, where alumina accounts for 40 per cent of the cost of making aluminium.

Cost pressures could worsen in the months to come as Chinese environmental reforms weigh most heavily on bauxite and alumina producers. That may give extra fuel for aluminium's 28 per cent ral…