Copper rises as aluminum prices rebound on tight supplies

Aluminum rebounded from two-month lows on Thursday, with renewed market interest in the impact that China’s power restrictions will have on smelters that produce the metal.

At 1040 GMT, benchmark aluminum on the London Metal Exchange (LME) was up 1.6% at $ 2,730 a tonne after hitting its lowest level in two months at $ 2,602. Copper was up 1.1% at $ 9,653 a ton.

Aluminum prices plummeted on Wednesday after China’s state planner said it would step in to cool coal prices amid a severe energy crisis. Energy accounts for about 40% of aluminum smelting costs.

China’s state planner set an immediate target price for thermal coal, in its most direct intervention yet to cool the market for the key fuel for power generation, sources told Reuters.

Although coal prices have fallen from recent record highs, the aluminum market is still short of supplies.

“Nothing has changed in terms of the fundamentals of aluminum; These power restrictions are still in place and the supply risk is still there”Said ING analyst Wenyu Yao, noting that Wednesday’s price decline on Wednesday was greater than due.

Global aluminum supply will remain tight, Commerzbank analysts said, due to pressure on smelter margins in China and warnings from Norsk Hydro and Rusal about continued shortages.

Aluminum production in China, the world’s leading producer, declined for the fifth consecutive month in September.

On-warrant aluminum inventories in LME-registered warehouses decreased to 625,350 tonnes, close to their lowest level since 2018.