Electricity prices push aluminum to 2-month peak

Benchmark aluminum rose 1% to $2,867 a tonne on the London Metal Exchange, having previously hit $2,880.5, the highest level since October 26 and a gain of more than 10% since November 5.

“There is no quick, permanent solution to the European power crisis. Even if prices are lower, it doesn’t mean that the risks are reducing,” ING analyst Wenyu Yao said.

“With aluminum producers in Europe trying to negotiate with electricity suppliers, they will find it difficult to find competitive deals in the long term.”

At current prices, electricity can account for about 50% of the cost of aluminum smelting.

Power: European accelerated electricity prices rose on Wednesday as day-to-day wind power supply in Germany was projected to halve, while demand in France was expected to rise due to lower temperatures.

List: The aluminum stock in LME approved warehouses, at 926,800 tonnes, has fallen by more than 50% since mid-March.

Canceled warrants – metals set for delivery – account for 34% of the total, suggesting more aluminum will leave LME warehouses in the coming days.

Europe: Consumers who buy aluminum in the physical market pay benchmark LME prices and premiums.

The European market is likely to see a firming up of duty paid premium of $390 a tonne, up 34% from December 1.

ING’s Yao estimates that 400,000 to 500,000 tonnes of aluminum production capacity has been closed in Europe.

Europe accounts for about 13% of global aluminum consumption of about 70 million tonnes this year.

China: The aluminum market is also focused on top producer China, where export restrictions by Indonesia have led to a rise in coal prices.

China and India, also a major aluminum producer, are major destinations for Indonesian coal.

Other Metals: Copper fell 0.4% to $9,728 a tonne, zinc slipped 0.1% to $3,601, lead rose 0.6% to $2,311, tin fell 0.2% to $39,100 and nickel fell 2.3% to $20,640. (Reporting by Pratima Desai, Editing by Mark Potter)