Shares of several large aluminum producers rise on weak inventories, supply concerns

Shares of several U.S. aluminum producers moved higher Friday as low inventories and tight supply raised prospects for continued price hikes.

Barclays Capital said in a research report that demand growth for aluminum, though slower this year than last, has remained robust.

Also, consumer inventories of aluminum are at relatively low levels in both the U.S. and China.

Barclays further cited such persistent supply problems as labor unrest, low ore grades and power outages. Three days ago, for example, Alcoa of Australia declared a “force majeure” under its alumina supply contracts because of an explosion at a natural gas plant that supplies its production.

A force majeure clause excuses a party from liability if an unforeseen event prevents it from performing its obligations under a contract.

“We believe that (the second half of 2008) will be a very strong period for aluminum prices and expect record levels to be reached, averaging $4,000 per metric ton in the fourth-quarter,” the Barclays report said.

In midday trading, shares of Alcoa Inc. rose $1.83, or 4.8 percent, to $39.54, and Century Aluminum Co. gained $4.62, or 7.1 percent, to $70.50. Bucking the trend, Kaiser Aluminum Corp. dipped 8 cents to $62.35.

The broad-based Dow Jones-AIG U.S. Aluminum Index was up 4.7 percent.

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