Aluminium and zinc prices were driven higher on Friday by mounting fears over supplies from China and worries about infrastructure in Sichuan province after the devastating earthquake there earlier this week.

Copper, tracking aluminium also rose but was capped by expectations of soft demand from Chinese consumers.

Aluminium for three-month delivery on the London Metal Exchange hit a three-week high of $3,042 a tonne.

The metal used in the packaging, power and transport industries traded at $3,030 a tonne in official rings from $3,010 at the close on Thursday.

Zinc, used for galvanising steel hit a four-week high $2,374.50 a tonne. It traded at $2,350 in the rings from $2,315.

Analysts estimate Sichuan has about 500,000-700,000 tonnes a year -- about 4 percent of the total in China -- of aluminium smelting capacity. The region also produces about 200,000 tonnes of zinc a year.

The most important metals on the refined side are aluminium and zinc, said Michael Widmer, analyst at Lehman Brothers.

Producers need to use power and roads to get their material out ... It's a tricky situation.

The problem is worse for energy-intensive aluminium because loss of Sichuan's output could push the market into deficit. Analysts expect supply and demand this year to be roughly balanced at about 40 million tonnes.

More of a concern is the power situation; Sichuan is rich in hydropower, much of which is sent elsewhere to China, and this is really what is causing the nervousness in the aluminium markets, MF Global said in a note.


For zinc, Sichuan's output is not as crucial as analysts expect a surplus of around 100,000 tonnes this year. Shortages would probably only arise if the smelters were closed for the rest of this year.

Zinc prices have risen ... but we expect support to be only temporary and for prices to come under pressure again before long, Barclays Capital said in a note.

Lead supply is vulnerable to disruptions and the market remains tight this year.

Sichuan also mines lead and disruptions could reinforce concerns about supplies.

Lead was untraded, but bid at $2,314 a tonne from $2,275 and copper traded at $8,341 a tonne from $8,296.

Dealers say Chinese buyers have stayed away from the copper market because they think prices are too high.

They've got some stocks they built up last year, they'll run through those before they come back, a London-based trader said. Copper would have to fall to near $7,000 before they come back willingly.

Tin came within striking distance of $25,550 a tonne, a record hit on Wednesday as investors bought on expectations of shortages created by supply problems in top producers China and Indonesia.

It traded at $25,210 from $25,250/25,300 on Thursday and nickel was at $26,400 a tonne from $26,305.

Metal Prices at 1215 GMT Metal Last Change Percent Move End 2007 Ytd Percent

move LME Cu 8390.00 94.00 +1.13 6670.00 25.79 SHFE Cu* 62800.00 1160.00 +1.88 56880.00 10.41 LME Alum 3035.00 25.00 +0.83 2403.00 26.30 SHFE Alu* 19500.00 460.00 +2.42 18180.00 7.26 COMEX Cu** 380.90 4.80 +1.28 303.50 25.50 LME Zinc 2360.00 45.00 +1.94 2370.00 -0.42 SHFE Zinc* 18820.00 350.00 +1.89 18950.00 -0.69 LME Nick 26450.00 145.00 +0.55 26350.00 0.38 LME Lead 2320.00 45.00 +1.98 2550.00 -9.02 LME Tin 25150.00 0.00 +0.00 16400.00 53.35 ** 1st contract month for COMEX copper * 3rd contact month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07

(Editing by Christopher Johnson)

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