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Shanghai aluminium climbs on fears of wider production cuts

Shanghai aluminium prices climbed on Friday, supported by fears of wider production cuts in China, the world’s biggest producer of the metal, amid restrictions on power consumption.

The most-traded October aluminium contract on the Shanghai Futures Exchange SAFcv1 had advanced 0.9% to 18,860 yuan($2,689.60) a tonne by 0515 GMT, while three-month aluminium on the London Metal Exchange CMAL3 fell 0.5% to $2,295 a tonne.

“There are bets on bigger and longer power cuts in Yunnan (province), aiding sentiment in a market where stocks remain low, but downward risk lies in macro-economic weaknesses,” a metal trader said.

Aluminium producers in the southwestern province will continue operating with 10% less power, with no sign of when restrictions implemented this week will be lifted, officials at two producers told Reuters on Wednesday.

Yunnan accounts for around 10% of China’s aluminium production capacity, with an annual operating capacity of 5.25 million tonnes of electrolytic aluminium. The power curbs in Yunnan came after low rainfall this year reduced its hydropower supply, which normally accounts for 75% of its electricity.

Shanghai aluminium gave up some of its gains after data showed China’s aluminium output climbed to a second straight monthly record in August, up 9.6% from a year earlier.

Data also showed the property sector in the world’s second largest economy contracted further, with falls in home prices, investment and sales.

This, together with bets of a big interest rate hike from the U.S. Federal Reserve next week, weighed on the prices of other metals.

ShFE copper SCFcv1 lost 0.4% to 62,030 yuan a tonne, nickel SNIcv1 fell 1.6% to 186,780 yuan a tonne and zinc SZNcv1 dropped 1.5% to 24,440 yuan a tonne.

LME copper CMCU3 slipped 0.5% to $7,689 a tonne and zinc shed 1.4% to $3,141 a tonne, while tin CMSN3 gained 1.9% to $21,200 a tonne.
Source: Reuters (Reporting by Siyi Liu and Dominique Patton; editing by Uttaresh.V and Subhranshu Sahu)

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