Shanghai aluminum rises on supply fears; state metal sale plan caps gain

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Aluminum prices in Shanghai rose on Thursday as talks of fresh output curbs in top producer and consumer China fueled concerns of disruption in supplies, although the gains were capped by planned release of metals from state reserves.

The most-traded October aluminum contract on the Shanghai Futures Exchange advanced 1.7% to 22,660 yuan ($3,521.75) a tonne at 0417 GMT, while three-month aluminum on the London Metal Exchange eased 0.2% to $2,886 a tonne.

Both contracts have risen about 45% so far this year, hit by supply worries mostly from China.

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Aluminum producer Shaanxi Nonferrous Yulin New Material will have to reduce its output by 50% in September as part of energy consumption controls, according to a local government document posted by consultancy MySteel.

The company has a smelting capacity of around 600,000 tonnes per year. Shaanxi Nonferrous Yulin and a local government official were not immediately able to comment on the document.

ANZ analysts, in their note, pointed out that power shortages in the country prompted authorities to enforce short-term closures.

“The market remains firmly focused on the supply side issues,” they said.

China’s aluminum output in August slipped for a fourth straight month, as restrictions on metal production and power usage in key smelting hubs kept supply tight.

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However, China’s state planner on Thursday reiterated its plan to release more metals from its reserves to “overcome mismatches between supply and demand,” adding that copper, aluminum and zinc prices are “still high.”

FUNDAMENTALS

* LME copper fell 1.1% to $9,521 a tonne, nickel dropped 2.4% to $19,530 a tonne while ShFE copper rose 0.5% to 70,120 yuan a tonne, ShFE tin jumped 2.4% to 260,030 a tonne and ShFE nickel eased 0.6% to 145,660 yuan a tonne.

* Top copper producer Codelco said on Wednesday it had reached an agreement on a labor contract with a union representing workers at its small Salvador division in northern Chile.

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($1 = 6.4343 yuan) (Reporting by Mai Nguyen in Hanoi; Editing by Devika Syamnath and Uttaresh.V)