LME aluminum rose to $3000 a tonne on Friday, as inventories of LME fell and traders worried that some aluminum producers might be forced to cut output as energy costs increased, meaning supply shortages could worsen.
Aluminium for LME delivery rose 0.3 per cent to $2930 a tonne, but has risen 4.5 per cent so far this week, near a 13-year high of $3229 a tonne.
Aluminum prices jumped 42 per cent in 2021.
Aluminium futures for LME are poised for their biggest weekly gain since October, driven by a surge in European electricity prices that has prompted smelters to cut production.
According to the BofA Global Research report, "the global aluminum market will remain in short supply in 2022. China's reversal of the temporary closure in the spring may still lead to a fall in aluminum prices, but we believe that in the end, the fundamentals of aluminum remain strong. "
LME aluminum registered warehouse receipts have reached 536175 tonnes, the lowest level since 2005, compared with 861800 tonnes on December 14, 2021.
The energy cost is about 40% of the cost of aluminum production.
Daniel Briesemann, an analyst at Commerzbank, said concerns about soaring energy prices in Europe and Asia, which means more smelters may cut output by spring, are driving aluminium prices higher.
"once the winter is over, we may see a correction in aluminum prices, as supplies in the aluminum market are expected to increase at that time."
Sentiment improved slightly after market participants digested the minutes of the US Federal Reserve / FED's hawkish December policy meeting, according to a trader in Singapore, adding that supply had been affected by novel coronavirus's controls and concerns about supply tensions had been exacerbated by the turmoil in Kazakhstan.
While a stronger dollar makes dollar-denominated metals more expensive for holders of other currencies, higher interest rates could reduce liquidity in financial markets and slow the US economic recovery.
BofA said about 650000 tons of aluminum output has been cut so far, and about 900000 tons of annual aluminum production is expected to be temporarily shut down because of high energy prices. The annual global consumption of aluminum is about 68 million tons.
BofA said in a report that there is expected to be a global shortage of 2.7 million tonnes of aluminium in 2024, when prices will rise to $3500 a tonne.
Copper for delivery in three months rose 0.6% to $9592 a tonne.
Three-month nickel rose 1.4 per cent to $20675, lead rose 0.2 per cent to $2312, zinc rose 0.8 per cent to $3577.50 and tin rose 2.5 per cent to $40100.
