Bloomberg cited Mr Judy Zhu analyst of Standard Chartered Plc as saying that aluminum prices in China may rise about 9%in coming weeks amid concerns about a shortage in the world’s largest consumer and producer of the metal.

Mr Zhu said that aluminum on the Shanghai Futures Exchange may advance to CNY 20,000 per tonne. The metal has advanced 8.9% in Shanghai this year to close at CNY 18,340 outpacing 4.6% gain by futures on the London Metal Exchange.

According to data from the Shanghai bourse, stockpiles of the metal have fallen 59% this year to the lowest level since August 2009. Prices were last above CNY 20,000 in March 2008. Production of aluminum gained to a record for a third month in June as high prices, ample raw materials and power supplies prompted smelters to raise output.

Mr Zhu said that “Strong demand on the ground has been supportive for the rally in domestic prices so far this year. Spot prices in Changjiang physical market in Shanghai are also trading at a premium over the three-month futures, suggesting less availability of the metal.”

He said that rising prices in China may encourage metal producers to further raise output depressing prices in the longer term. 2 million tonnes of new capacity will start commercial production next year.

According to the National Development and Reform Commission, inventories have tumbled this year as fabricators raised capacity utilization rates to meet rising demand from makers of air conditioner to beverage can producers. Power shortages eased in June as rainfall boosted generation of hydroelectricity.

(Sourced from Bloomberg)