The base metals were nearly all in the black on Thursday. Copper started up in the pre-dawn hours and climbed until the late morning, but then ran into a determined selloff that sank it back into negative territory at $3.7929/lb., down a penny and a third.

Nickel poked through the $10 barrier at mid-morning, then fell off steeply before closing with a meager gain of 5¾ cents, at $9.6812/lb. Zinc had another strong day and, though it pulled back nearly 3 cents from its highs, still ended at $0.8711/lb., up more than 4 cents. Aluminum went vertical in the pre-dawn hours, continued higher until mid-morning, then eased to $1.4466/lb., up more than 3 cents, while lead was smoking, adding another 7¼ cents to Wednesday’s 6 cent gain and finishing at $0.8616/lb.

Aluminum hit its highest level ever, breaching the $1.50 mark at 10:30 before subsiding later in the session.

The metal was the talk of the sector as it took off after the Aluminum Corp of China (ACH) and its peers – a group of 20 companies which produce over 70% of the country’s aluminum output – signed an accord that will cut output by 5-10% , the China Nonferrous Metals Industry Association said .

That may remove as much as 1.2 million metric tons, RBS Sempra Metals says, which would go a long way toward easing the current supply glut. The global supply surplus was 458,000 tons in the first four months of this year.

The gang of 20 “also call for other producers in the country to cut output, showing support for the Beijing Olympic Games and creating an easier market condition for the industry,” the Association said.

The move was seen as an attempt to curb energy use (aluminum being the most electricity-intensive of the metals) ahead of the Olympics. Authorities eliminated preferential power rates to smelters in January this year, and have also been cutting rebates for aluminum end-products.

But analysts at MF Global (MF) cautioned against irrational exuberance, writing that “while today’s price reaction may be justified, the situation is very fluid, and may not necessarily be sustainable given the uncertainty about the time-line of the reductions, and more importantly how demand, exports, and duties, all play out against this production decrease.”

Taking an opposite tack, Gayle Berry, of Barclays Capital London (BARC), said that, “We think these cut-backs in production will be a long term issue, and is not going to last for only a few weeks. They will continue to categorize the market going forward and could intensify in nature.”

Source: Base Metals Strong for a Second Day – Aluminum Hits All-time High