Aluminum hits nine-month high

LONDON Fri Feb 15, 2008 12:15pm EST

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LONDON (Reuters) - Aluminum climbed to a nine-month high on Friday, supported by worries over the impact of power cuts in South Africa and China on mine output, analysts said.

A common raw material for cars and aircraft, aluminum for three months delivery on the London Metal Exchange touched $2,873 per metric ton, its highest level since May 22, 2007, and ended the day at $2,820 per metric ton, up $10 from Thursday.

Energy-intensive to produce, aluminum is vulnerable to restrictions on power use.

"Even if the Chinese power problems are fixed, surging thermal coal prices will raise the cost of power in many producing countries," BNP Paribas analyst David Thurtell said.

"South Africa is likely to have problems maintaining or growing production (in the) medium term."

Aluminum has come sharply into focus in recent days on concerns that smelters in southern Africa, with an annual capacity of 1.5 million metric tons, could lose some or all of their electricity supplies in a proposed buyback deal by South African state-owned generator Eskom.

"This will mean fewer supply increases and pressure on those smelters trying to operate against a background of scarce or pricey power," UBS analyst Robin Bhar said in a report.

Investors are taking advantage of power crises in South Africa and China to speculate on further rises in aluminum, which has lagged other base metals in the past few years, analysts say.

"Whatever happens, the power situation in South Africa will not be resolved quickly, and it seems likely that the aluminum sector there will be hindered by power supply problems. Future projects and expansions will also likely be delayed or may even be shelved completely," Standard Bank analysts said.

Copper was up $55 at $7,735 per metric ton, partly driven by another drawdown in the inventories.

Stocks of copper in LME registered warehouses fell 4,000 metric tons to 150,650 metric tons, bringing this week's total decline to around 14,000 metric tons.

Zinc was down $36 at $2,315 per metric ton.

Lead shed $45 to $2,970 per metric ton, tin was down $200 at $16,800/16,875 per metric ton and nickel lost $275 to $27,625 per metric ton.

(Additional reporting by Alfred Cang in Shanghai and Anna Stablum in London; editing by Chris Johnson)

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