Aluminium prices fell for a second day on Friday as a rally sparked by US sanctions against Russia's Rusal, the world's second-biggest producer, appeared to stall. Nickel also moved lower as fears diminished that Washington might broaden its sanctions to include Norilsk Nickel (Nornickel).
Benchmark aluminium on the London Metal Exchange closed 0.6 percent down at $2,469 a tonne. Trading volumes were the lowest since before April 6, when sanctions on Rusal and its billionaire owner Oleg Deripaska forced international banks, miners and exchanges to curb their connections to the company.
Rusal accounted for more than 6 percent of global aluminium output last year and fears of supply shortages pushed prices to a seven-year peak of $2,718 on Thursday. The metal is still up 23 percent since April 6.
"We are starting to reach fundamental headwinds," said ING analyst Oliver Nugent. The LME price has risen much faster than prices in China, opening the possibility that China could begin to export metal and fill some of the supply gap left by Rusal.
"It could for the first time be profitable to export Chinese metal. There's a hope and a feeling that China will be able to offset a lot of this void (in aluminium supply)," Nugent said. The most-traded June aluminium contract on the Shanghai Futures Exchange is up only about 6 percent since the Rusal sanctions were imposed.
Traders were also more optimistic that Rusal might avoid destruction after the Russian government said it could nationalise the company temporarily and rumours circulated that Rusal was talking to Chinese buyers, Nugent said. LME aluminium is expected to test support at $2,348 a tonne, a break below which could cause a loss to the next support at $2,260, said Reuters technical analyst Wang Tao.
On-warrant stocks of aluminium available to the market in LME-registered warehouses fell to 939,750 tonnes, down about a fifth since February 22 and signalling tighter supply. LME nickel ended 1.6 percent down at $14,830 a tonne after touching a three-year high of $16,690 on Thursday. It was still up more than 5 percent this week. Copper closed 0.1 percent up at $6,992 a tonne, zinc rose 0.3 percent to $3,232, lead was up 1.2 percent at $2,365 and tin finished with a 1.3 percent gain at $21,725.
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