By Mai Nguyen
Aug 18 (Reuters) – Aluminium prices in Shanghai advanced on Thursday, supported by depleting supplies amid rising energy costs, but weakening demand outlook capped gains.
The most-traded September aluminium contract on the Shanghai Futures Exchange SAFcv1 advanced 0.7% to 18,630 yuan ($2,744.83) a tonne by 0403 GMT.
Norsk Hydro NHY.OL said on Wednesday it would close an aluminium facility in Slovakia by end-September, following other recent halts in Europe because of high electricity prices.
Aluminium is the most energy-intensive base metal to produce.
LME inventories of aluminium MALSTX-TOTAL tumbled to 276,875 tonnes from 1.97 million tonnes in March 2021. ShFE aluminium stockpiles AL-STX-SGH almost halved since March.
Power controls in China amid a severe heat wave also sparked concerns about metal supply.
Aluminium maker Henan Zhongfu Industrial 600595.SS shut production as Sichuan province ordered industrial users to suspend operations to prioritise residential power supply. Production in Chongqing was also affected, albeit minimally.
But a firm dollar, which makes metals traded in the U.S. currency more expensive to holders of other currencies, rising interest rates and weak global demand still weigh on the outlook of industrial metals.
Three-month aluminium on the London Metal Exchange CMAL3 fell 0.3% to $2,403.50 a tonne, down some 40% from a record high in March.
“While we do not expect prices to collapse back to pre-COVID-19 levels yet, they will continue to be under pressure in Q3 2022,” said Fitch Solutions in a note.
Fitch Solutions adjusted their average LME aluminium price forecasts for 2022 to $3,000 a tonne, from $2,850 previously, and lowered their 2023 forecast to $2,700 a tonne from $2,800.
However, aluminium prices should be elevated in coming years amid a shift to a green economy while supply faces short-run constraints from potentially persistent high energy prices and the loss of some Russian export in the longer-term, they added.
ShFE copper SCFcv1 shed 0.7% to 61,620 yuan a tonne, zinc SZNcv1 dropped 2.9% to 24,860 yuan a tonne, while LME zinc CMZN3 fell 1.1% to $3,473.50 a tonne and LME copper CMCU3 dipped 0.4% to $7,895.50 a tonne.
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(Reporting by Mai Nguyen in Hanoi; Editing by Subhranshu Sahu and Rashmi Aich)
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