Shanghai aluminium at 2-year high; other base metals slump on firmer dollar

Shanghai aluminium rose on Thursday, as supply constraints and the prospect of improved demand supported prices, even as other base metals slumped after a stronger U.S. dollar made greenback-priced commodities more expensive for overseas buyers.

The most-traded July aluminium contract on the Shanghai Futures Exchange climbed as much as 3% in early trade, tracking overnight gains in London prices.

The contract was up 1.6% at 21,630 yuan ($2,983.70) a ton, as of 0542 GMT, its highest since March 2022.

"Ex-China prices were driven by supply disruptions because of western sanctions on Russian metals, subsequently that gave a boost to China prices," said a Beijing-based analyst.

The three-month aluminium on the London Metal Exchange retreated 0.3% to $2,778 per metric ton, but hovered close to a two-year high last seen on Wednesday.

Demand for the light metal has been robust, underpinned by solar and electric vehicles sectors.

China said on Wednesday it will control adding further smelting capacity to copper and aluminium sectors as part of its efforts to curb carbon dioxide emissions in key industries.

The reiteration on aluminium capacity control is likely to boost sentiment, but actual impact is limited given that the government already set a cap for primary aluminium capacity at 45 million tons in 2018, analysts at Xinda Futures said.

Also fanning market sentiment was a higher premium offered by a global aluminium producer to Japanese buyers amid tight supply.

Elsewhere, metals prices fell after the U.S. dollar scaled to a two-week peak.

LME copper dropped 1.8% to $10,272 a ton, nickel fell 1.8% to $20,130, zinc declined 1.2% at $3,066.50, tin slid 1.8% to $33,500, and lead slipped 1.3% to $2,302.

SHFE copper fell 2% to 83,220 yuan a ton, tin was down 1.6% at 275,710 yuan, nickel lost 2.2% to 151,820 yuan, zinc shed 0.8% to 24,855 yuan and lead moved 0.5% lower to 18,830 yuan.