* GRAPHIC-2019 asset returns: tmsnrt.rs/2jvdmXl
* Prices supported by market caution on Alunorte
* Alumina market tight while aluminium market well supplied (Adds official prices, fresh quote, bullets, nickel)
By Zandi Shabalala
LONDON, March 27 (Reuters) - Aluminium touched a one-week high on Wednesday as inventories fell and prices shrugged off another step towards a full restart of Norsk Hydro’s Brazil alumina operations.
Hydro said it had agreed with the Brazilian government for a third party to conduct a technical assessment on two clearances that, if confirmed, could lead to a full ramp-up in output at its Alunorte refinery.
The plant has been operating at half capacity since early 2018.
Uncertainty over whether Alunorte will gain final approval to restart, given a series of conflicting rulings over a lethal dam breach at miner Vale in January, is keeping prices supported, Julius Baer analyst Carsten Menke said.
“We need to be cautious in terms of regulatory aspects in Brazil at the moment considering how volatile the news flow has been around Vale, with courts allowing restarts and other courts blocking it again,” he said.
Benchmark aluminium closed 1.3 percent higher at $1,911 per tonne after touching its highest since March 21 at$1,919.50.
At full capacity Alunorte can produce some 6.4 million tonnes of alumina - the raw material for aluminium - or 10 percent of the world’s capacity outside China.
“The alumina market is still very tight in the near term and the Hydro announcement is still aspirational and will take some time yet to bring back production,” a senior merchant trader said.
“I don’t feel it changes anything for the next three months.”
ALUMINIUM STOCKS: Headline aluminium stocks in LME-approved warehouses fell 7,000 tonnes to 1.14 million tonnes, the lowest since mid-December. MALSTX-TOTAL
However, cash aluminium is trading at a $19.25 a tonne discount to the three-month contract, against a premium of $16.75 in December, indicating supply concerns have eased. CMAL0-3
“The aluminium market, in contrast to expectations about six months ago, is not tight at all,” said Julius Baer’s Menke.
“We are seeing constant record high exports from China, which is a consequence of sufficient supplies but also weak demand driven by weakness in the car sector in China.”
ZINC: The premium of cash LME zinc over the three-month contract CMZN0-3 was at $56 a tonne from $47 in the previous session as LME stocks hit a record low of 55,225 tonnes. MZNSTX-TOTAL
NICKEL: Indonesia’s nickel-related industries such as the production of stainless steel and battery materials are set to surpass the value of its second-biggest export earner, palm oil, in the next 10 to 15 years, its investment board chief said on Wednesday.
PRICES: Copper ended barely changed at $6,335 per tonne, zinc rose 0.5 percent at $2,887, tin gained 0.4 percent to $21,350, and nickel shed 0.3 percent to $13,060.
Lead was up 0.7 percent to $2,007 per tonne after falling to a two-month low of $1,985.50 per tonne.
Editing by Jan Harvey and Alison Williams