Industrial Metals Charge to Fresh Highs as Inflation Runs Hot

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(Bloomberg) — A rally in base metals is gathering pace, with concerns about supply combining with strong demand to propel prices to multiyear highs.

Aluminum notched a fresh 13-year high and nickel stormed to the highest since 2014 in London. Both metals are benefiting from a robust long-term outlook due to their roles in the clean-energy transition, as well as China’s crackdown on emissions in its energy-intensive industries.

“Nickel has been hovering around, waiting to find a way to break through $20,110,” said Zhou Weigang, analyst with Jinrui Futures Co. “China’s crackdown on energy-intensive industries is spreading from aluminum to stainless steel and nickel pig iron.”

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The surge in commodities, as well as soaring shipping costs and an uneven economic recovery, have been pressuring global consumer prices. Data on Thursday showed China’s factory-gate inflation accelerated to a 13-year high, while figures due next week are set to show the U.S. CPI rose by more than 5%.

Aluminum climbed as much as 1.9% to $2,848 a ton on the London Metal Exchange, the highest since 2008, before trading at $2,844. As well as production constraints in China, the metal has been given an additional boost from concerns a coup in Guinea may tighten bauxite supply. Nickel jumped 2.8% to $20,255 a ton, the highest since 2014.

Read more: China Will Need to Reassess Its Efforts to Cap Commodity Prices

There are already signs that the commodities boom is re-shaping consumption patterns. Top air-conditioner maker, Japan’s Daikin Industries Ltd., plans to replace half of the copper in its units with aluminum by 2025. And a Chinese state researcher is working with top home-appliances groups on using more aluminum.

Nickel, a key component in electric-vehicle batteries, is expected to be among the raw materials that stand to gain most from a global transition to low-carbon energy sources. Tesla Inc. in July struck a nickel-supply deal with BHP Group, as the EV maker seeks to protect itself from a future supply crunch. 

In the meantime, surging Chinese production of stainless steel is fueling nickel demand. Stainless futures rose as much as 2.7%, while steel rebar climbed more than 4%.

©2021 Bloomberg L.P.

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