These smelters may cut output by a maximum 400,000 metric tonnes in the second half. The figure is equivalent to about 2.7 per cent of this year's production, according to an estimate by China International Capital Corp.
"We expect prices to range between $3,300 and $3,500 over the next three months because of power-related issues and the Chinese cut,'' Eliane Tanner, a commodity analyst at Credit Suisse Group in Zurich, said.
Aluminum for delivery in three months rose as much as $90.15, or 2.7 per cent, to $3,380.15 a tonne on the London Metal Exchange on Friday.
The lightweight metal used in cars and beverage cans has surged 40 per cent this year, the most among LME metals after tin, as rising energy prices squeezed smelters' profit margins.
The planned cut in China, the world's largest producer of the metal, would almost eliminate a global surplus of 458,000 tonnes in the first four months of the year, estimated by the World Bureau of Metal Statistics.
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`Makes sense'
The Chinese reduction has more to do with a glut in domestic supply than power shortages, according to Leon Westgate, an analyst at Standard Bank Plc in London.
"Aluminum demand in China has fallen and domestic stocks have crept up,'' he said. "It makes sense to cut back what is essentially excess aluminum production, and use the electricity in other parts of the economy over the short term.''
Some analysts said the cut wouldn't likely materialise.
"We don't think the producers will really do what the association proposes given they have a fat profit to earn, up to 1,500 yuan ($219) per tonne,'' Bonnie Liu, an analyst at Macquarie Group, said from Shanghai. "Even if they do as promised, the production loss would be offset by a global surplus of between 750,000 and 800,000 tonnes this year," she said.
The implied volatility on aluminum options jumped to 29.68 per cent, the highest since April 3 and signaling that traders expect prices to continue to oscillate.
China producers
Lead increased $77, or 3.9 per cent, to $2,061 a tonne on Friday, heading for a record weekly gain of 31 per cent. Inventories tracked by the LME dropped 2,225 tonnes, or 2.2 per cent, to 98,950 tonnes, the biggest slide since September 19.
Zinc producers in China, the world's largest consumer and producer, including Sichuan Hongda Chemical Industry, and Henan Yuguang Gold & Lead Co are meeting soon to discuss what other measures to take, according to a company executive who declined to be named as his company wasn't invited to the talks. The official spoke earlier in the day to smelter executives who will attend the meeting.
Privately-owned small-to-medium sized smelters are likely to reduce output as losses mount when prices fall below production costs, the executive said.
Zinc gained as much as 4.3 per cent to $2,074.75 a tonne on Friday, the highest intraday price since May 29.
Among other metals traded on the LME, copper gained $75, or 0.9 per cent, to $8,305 a tonne and nickel fell $40, or 0.2 per cent, to $21,860. Tin increased $652, or 2.9 per cent, to $23,352 after LME-tracked stockpiles jumped 8.1 per cent to 6,015 tonnes.