LONDON: Aluminium and nickel prices hit multi-year highs on Tuesday after Russia ordered troops into two breakaway regions of eastern Ukraine, raising fears of war and sanctions on Moscow that could interrupt Russian exports.

Russia produces around 6% of the world’s aluminium and 7% of its mined nickel. Sanctions on aluminium maker Rusal in 2018 drove the metal’s price up 35% in days.

Benchmark aluminium on the London Metal Exchange (LME) was up 0.7% at $3,301.50 a tonne at 1730 GMT after reaching $3,380, just shy of 2008’s record of $3,380.15.

The metal used in packaging and transport is up around 17% this year after rising 42% in 2021.

LME nickel was up 0.9% at $24,555 a tonne after touching $24,925, the highest since 2011. Used in stainless steel and batteries for electric vehicles, nickel is up around 18% this year having risen 25% in 2021.

Even with Russian exports flowing, both metals are undersupplied, said ING analyst Wenyu Yao.

“Before this Russia-Ukraine crisis escalated, they were already seeing very strong fundamentals,” she said.

RUSSIA: Germany put a new gas pipeline on ice and Britain hit Russian banks with sanctions on Tuesday, as the West responded to Moscow’s recognition of two separatist regions in Ukraine and a speech by President Vladimir Putin suggesting more belligerent aims.

MARKETS: US stock markets fell and oil prices surged to a seven-year high.

SANCTIONS RISK: Western countries are unlikely to impose blanket sanctions on Rusal as high aluminium prices would damage manufacturing, analysts say.

ALUMINIUM: Shortages have dragged inventories in LME-approved warehouses to 835,125 tonnes from almost 2 million tonnes in March last year.

The premium for quickly deliverable cash aluminium over the three-month contract is near its highest since 2018 and duty-paid physical premiums in Europe and the United States have risen to record highs.

NICKEL: Stocks in LME-registered warehouses have fallen to 82,314 tonnes from more than 260,000 tonnes in April last year, and the premium for cash nickel over three-month metal surged to its highest since 2009.

CHINA: China, the biggest metals consumer, said it would unveil bigger tax and fee cuts and step up payments to local governments to offset their lost revenues amid efforts to support a slowing economy.

OTHER METALS: Benchmark copper was up 0.2% at $9,916 a tonne, zinc rose 1.3% to $3,603, lead added 0.2% to $2,339 and tin was up 0.4% at $44,340.