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Shanghai aluminum rises on supply fears and high coal prices

Aluminum prices in Shanghai rose on Thursday on concerns over supply disruption in top consumer and producer China as well as surging thermal coal prices.

The most-traded October aluminum contract on the Shanghai Futures Exchange closed 1% up at 22,495 yuan ($3,492.69) a tonne while three-month aluminum on the London Metal Exchange eased 0.3% to $2,885 at 0702 GMT.

Both contracts have risen more than 40% this year on the back of supply worries, mostly from China.

Aluminum producer Shaanxi Nonferrous Yulin New Material, which has smelting capacity of about 600,000 tonnes a year, 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.

Local governments in Guangxi and Guizhou, two of China’s top aluminum and alumina regions, issued notices restricting power consumption by aluminum and alumina producers, Mysteel reported, potentially further disrupting output of the energy-intensive metal.

“The market remains firmly focused on the supply side issues,” ANZ analysts said in a note.

China’s aluminum output in August slipped for a fourth straight month.

Also contributing to higher aluminum prices were Chinese thermal coal futures that have nearly doubled this year. Most aluminum production in China uses electricity generated by coal-fired power plants.

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 1.3% to $9,498 a tonne, nickel dropped 2.5% to $19,510, ShFE copper eased 0.2% to 69,650 yuan, ShFE tin jumped 2% to 259,110 and ShFE nickel shed 1% to 145,040 yuan.

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

* For the top stories in metals and other news, click or
Source: Reuters (Reporting by Mai Nguyen in Hanoi Additional reporting by Tom Daly Editing by Uttaresh.V and David Goodman )

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