Aluminum Gains as Alcoa Sees Tighter Supply on Smelter-Cut Plan

Aluminum jumped to a five-week high in London after Alcoa Inc., the largest U.S. producer, forecast a global production deficit.

Alcoa said yesterday that global demand will exceed supply this year by 600,000 metric tons. The New York-based company reported a fourth-quarter net loss of $191 million, the first in more than two years, which included costs to trim smelting capacity by 12 percent after prices fell last year. Aluminum has rallied 10 percent since reaching a 17-month low in December.

“The comments from Alcoa were more encouraging than people anticipated on demand prospects,” William O’Neill, a partner at Logic Advisors in Upper Saddle River, New Jersey, said in a telephone interview. “It suggests underlying strength in metals overall.”

Aluminum for delivery in three months rose 2.7 percent to settle at $2,164 a ton at 6:20 p.m. on the London Metal Exchange, after reaching $2,165, the highest since Dec. 2.

Alcoa Chief Executive Officer Klaus Kleinfeld said on a conference call yesterday that the company predicts China will curtail 1.1 million metric tons of aluminum production capacity this year.

“The recent cutback news and a pickup in warrant cancellations underpinned aluminum,” William Adams, the head of research at Basemetals.com, said in a report today. Orders to draw the metal from LME warehouses, or canceled warrants, jumped 15 percent to a record 744,925 tons yesterday.