Supply fears drive Shanghai aluminium to two-month peak

Jan 6 (Reuters) – Shanghai aluminium prices hit a more than two-month high on Thursday, driven by higher power prices and rising supply concerns.

The most-traded February aluminium contract on the Shanghai Futures Exchange closed 2% up at 20,685 yuan ($3,244.55) a tonne. Prices earlier hit their highest since Oct. 27 at 20,835 yuan.

Three-month aluminium on the London Metal Exchange (LME) was down 0.4% at $2,908.5 a tonne by 0820 GMT.

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Aluminium is benefiting from higher coal prices, one Singapore-based trader said, adding that a supply deficit and higher energy prices are supporting price resilience.

Chinese thermal coal futures were down 0.6% at 697.2 yuan a tonne, having jumped by about 5.5% this week on supply disruption fears after an export ban by Indonesia. Most aluminium production in China uses electricity generated by coal-fired power plants. read more

A surge in power and natural gas costs across Europe has also led to output reductions at smelters in the region. read more

Aluminium inventories in LME-registered warehouses were last at 926,800 tonnes, down more than 50% since hitting a 1.96 mln tonne high in March last year.

* LME copper fell 1.6% to $9,544 a tonne after touching a two-week trough of $9,530.

* LME nickel slipped 1.5% to $20,330 a tonne, lead eased 0.2% to $2,282, zinc was 1.4% down at $3,537.5 and tin fell 0.7% to $39,025.

* Industrial metals came under pressure from a stronger dollar after minutes from the U.S. Federal Reserve’s meeting signalled a sooner than expected increase to interest rates.

* ShFE copper fell 1% to 69,490 yuan a tonne, nickel slipped 2% to 149,930 yuan, lead fell 1.4% to 15,060 yuan and tin was up 0.1% at 295,350 yuan.

* Australian diversified miner South32 Ltd (S32.AX) said it would spend about $70 million to restart the Alumar aluminium smelter in Brazil with joint venture partner Alcoa Corp (AA.N).

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($1 = 6.3753 Chinese yuan renminbi)

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Reporting by Eileen Soreng in Bengaluru
Editing by David Goodman

Our Standards: The Thomson Reuters Trust Principles.