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Aluminium prices held near 13-1/2 year highs on Wednesday as a supply shortfall caused by smelter closures in Europe and China ate further into exchange stockpiles.
Smelters have cut output due to high energy prices and a crackdown on polluting industry in China, where power-hungry aluminium plants use electricity generated using coal.
The roughly 65 million tonne a year market was undersupplied by just over a million tonnes in 2021 and could see a 1.5-1.6 million tonne deficit this year, said independent analyst Robin Bhar.
Benchmark aluminium CMAL3 on the London Metal Exchange (LME) was up 0.6% at $3,202 a tonne at 1118 GMT after reaching $3,236 on Tuesday, the highest since July 2008.
Prices are up around 14% this year after rising 42% in 2021 and are closing in on 2008’s record of $3,380.15 a tonne.
“At a time when demand is building, we’re not seeing the supply to meet it,” said Bhar.
INVENTORIES: Aluminium stocks in LME-registered warehouses have fallen to 761,950 tonnes, the lowest since 2007 and down from almost 2 million tonnes last March.
Inventories in Shanghai Futures Exchange (ShFE) warehouses are down 17.5% this year to 266,906 tonnes.
SPREAD: Tight supply on the LME drove the premium for cash aluminium over the three-month contract to $40 a tonne, the highest since July 2018, on Tuesday. The premium eased on Wednesday to $31.50. CMAL0-3
ENERGY PRICES: Energy prices have surged, hitting smelters for which power typically accounts for around 30-40% of production costs. O/RCZCcv1, TRNLTTFMc1, TRDEBD1
Worst hit is Europe, where more than 1 million tonnes of output has been cut, analysts at ANZ say.
BULLISH: Goldman Sachs on Tuesday raised its aluminium price forecasts with a new 12-month target of $4,000 per tonne and said it sees prices averaging $3,450 in 2022.
BEARISH: However, the median forecasts from a Reuters poll last month were for a deficit of 609,000 tonnes this year and for cash aluminium CMAL0 to average $2,780 a tonne.
OTHER METALS: LME copper CMCU3 was up 0.1% at $9,788 a tonne, zinc CMZN3 rose 0.3% to $3,604.50, lead CMPB3 climbed 0.3% to $2,211, tin CMSN3 was up 0.1% at $42,955 and nickel CMNI3 added 1% to $22,925.