Aluminum: prices on standby, weighed by weak demand

Shanghai aluminum prices rose Thursday, buoyed by depleted inventories and rising energy costs, but prospects for weakening demand limited gains.

Norsk Hydro NHY.OL said Wednesday it will close an aluminum production plant in Slovakia by the end of September, following other recent shutdowns in Europe due to high electricity prices. Aluminum production is the most energy-intensive base metal.

LME aluminum stocks fell to 276,875 tons from 1.97 million tons in March 2021. ShFE aluminum stocks have nearly halved since March.

Power controls in China due to a severe heat wave have also triggered concerns about metal supply.

Henan aluminum producer Zhongfu Industrial 600595.SS shut down production as Sichuan province ordered industrial users to suspend operations to prioritize power supply to homes. Chongqing production was also affected, albeit minimally.

But a strong dollar, which makes metals traded in the U.S. currency more expensive for holders of other currencies, rising interest rates and weak global demand continue to weigh on the outlook for industrial metals.

Three-month aluminum on the London Metal Exchange CMAL3 fell 0.3 percent to $2,403.50 a ton, down about 40 percent from its all-time high in March.