METALS-Aluminium touches 2-1/2 month high as output cuts loom

    (Updates prices)
    LONDON, Jan 7 (Reuters) - Aluminium prices on Friday reached
their highest since Oct. 21 as the amount of metal available in
London Metal Exchange warehouses fell and traders worried that
high energy costs would force more smelters to cut output,
worsening a supply shortage.
    Benchmark aluminium         on the LME rose as high as
$2,980 a tonne before slipping back to $2,908.50 a tonne by 1522
GMT, down 0.4% for the day.
    Prices were still up around 3.5% this week after rising 42%
in 2021.
    Energy prices have rocketed in Europe and Asia and more
smelters will likely cut production before spring, pushing
aluminium prices higher, said Commerzbank analyst Daniel
Briesemann.
    "Once we get out of winter, we should see a correction
because more supply should be available again," he said.

    STOCKS: On-warrant stocks of aluminium in LME-registered
warehouses have plunged from more than 861,800 tonnes on Dec. 14
to 536,175 tonnes, the lowest since 2005. CUTS: Energy usually accounts for around 40% of aluminium
smelters' operating costs, analysts at Bank of America said.
    "With around 650,000 tonnes of capacity cut so far, we
believe that another 900,000 tonnes of output is at risk of
closing down fully or partially over high energy prices," they
said.
    Around 68 million tonnes of aluminium - used in packaging,
transport and construction - are made each year. Output cuts in
top producer China pushed the market into deficit in 2021.

    Bank of America predicted the deficit would rise to 2.7
million tonnes in 2024, when prices would be around $3,500 a
tonne.
    COLUMN: Europe's power crunch is sparking an aluminium
smelter meltdown, writes Reuters columnist Andy Home.

    MARKETS: Global equities, which reached record highs this
week, edged lower after weaker-than-expected U.S. payrolls data.

    COPPER: Copper smelting activity was steady in December as a
slowdown in China was offset by gains elsewhere, data from
satellite surveillance of copper plants showed on Friday.

    PRICES: LME copper         was up 0.8% at $9,608 a tonne,
zinc         fell 0.4% to $3,535, nickel         gained 1.3% to
$20,640, lead         was down 0.4% at $2,298.50 and tin
was 1.9% higher at $39,900.

 (Reporting by Peter Hobson; Additional reporting by Eileen
Soreng in Bengaluru; Editing by Jan Harvey, Elaine Hardcastle)



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