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Aluminium jumps amid supply concerns on report of China smelter blast

Aluminium prices surged on Friday amid supply disruption worries following a report that a smelter in China had stopped production after an explosion.

An aluminium plant in China’s Yunnan province with annual capacity of 300,000 tonnes has stopped production after an explosion on Thursday evening, Shanghai Metals Market reported.

The most-traded January aluminium contract on the Shanghai Futures Exchange rose as much as 3.7% to 19,260 yuan ($3,016.96) a tonne, while three-month aluminium on the London Metal Exchange surged as much as 3.1% to $2,696 a tonne.

Aluminium has been one of the hardest hit sectors by the recent China power curbs due to the metal smelting process’ high energy consumption.

The electricity curbs in China have slashed around 7% of domestic aluminium annual capacity so far this year, according to estimates from consultancy Wood Mackenzie.

The premium of LME cash aluminium over the three-month contract MAL0-3 rose to $17 a tonne, the highest since Aug. 31, indicating tightening nearby supplies, as on-warrant inventories in LME warehouses fell to 587,900 tonnes, their lowest since December 2005.

Inventories in China, however, have risen slightly in recent weeks as the power shortage issues eased.

Other industrial metals also rebounded strongly, having been pressured by a firm dollar amid prospects of a rate hike in the United States and a liquidity crisis in the Chinese property sector, which consumes a large amount of metals.

“I think the market was over-sold. Fundamentals (for base metals) are good. People were too worried about real estate demand, ignoring the increment from new energy,” said a Shanghai-based base metals trader, who added that the news of the aluminium smelter also helped boost the market.

FUNDAMENTALS
* Chinese refined copper spot premium SMM-CU-PND surged to 1,225 yuan a tonne, a level unseen since April 2014, with traders attributing the rise to improving appetite for domestic material while supply is tight.

* ShFE nickel climbed as much as 4.2% to 147,840 yuan a tonne, copper SCFcv1 advanced 2.2% to 70,800 yuan a tonne at 0614 GMT and tin rose 1.9% to 290,140 yuan a tonne.

* LME copper CMCU3 was up 1.8% at $9,615.50 a tonne, nickel CMNI3 gained 1.4% to $19,910 a tonne and zinc CMZN3 rose 1.6% to $3,210 a tonne.
Source: Reuters (Reporting by Mai Nguyen in Hanoi, Emily Chow in Shanghai and Dominique Patton in Beijing; Editing by Shounak Dasgupta)

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