China aluminum extended gains on Thursday, striking its highest since 2012, as investors flooded into the market on prospects that capacity closures in the world's top producer would tighten supply.
Shanghai Futures Exchange aluminum had climbed 1.4 percent to 16,275 yuan ($2,443) a ton having earlier hit its highest since May 2012 at 16,460 yuan.
Open interest flew to a record-high around 900,000 lots and was up by 50 percent since August 1.
London Metal Exchange aluminum hovered near its highest in more than two years above $2,000 a ton.
China's push for blue skies is roiling supplies and boosting prices of key raw materials as the country ramps up smog checks and forces some factories in the world's top commodities market to close or suspend operations.
"Commodities prices are rallying on the news of more environmental checks... We are expecting these tougher checks to continue until the air quality improves," said Lin Boqiang, energy expert with Xiamen University.
The central government is under pressure to clean up 28 cities by forcing steel, aluminum and cement plants to cut output by September to tackle winter smog.
While the current disruption may only last a few weeks, sudden supply jolts and price swings in niche markets are likely to continue.
Analysts also agree that the government's years-long push to remove excess capacity in large bloated heavy industries are also starting to take hold, providing support for prices of aluminum and steel.
