Aluminium prices extended their rally on Wednesday to a sixth straight session, hitting an 11-week peak, amid persistent worries about shortages after the United States imposed sanctions on Russia's Rusal. Several metals went into the red after US President Donald Trump warned Russia of imminent military action in Syria over a suspected poison gas attack, declaring that missiles "will be coming", but recovered at the close.
Both the London Metal Exchange (LME) and the CME Group said they were taking action to restrict aluminium brands of Rusal, one of the world's biggest producers, on their exchanges. "There's a lot of panic and uncertainty. Buyers are scrambling to try to replace where they can, to plug the gap left by not having Russian-origin metal," said Robin Bhar, head of metals research at Societe Generale in London.
"This seems to be just the start (of rallying prices). Given this is a balanced if not tight market I don't see how you can easily replace that missing Russian origin material in the short term." Three-month aluminium on the LME surged to a peak of $2,277.50 a tonne, the highest since Jan. 24, closing 2.2 percent higher at $2,250 per tonne.
Trader Glencore, a Rusal shareholder and customer, will declare force majeure on some aluminium supply, a source familiar with the matter said. Physical premiums for aluminium deliveries to mainland China from Shanghai Futures Exchange bonded warehouses rose by $5 to $135 a tonne. In the United States, the Comex aluminium premium jumped to 20.7 cents a pound ($456 a tonne) from 18.4 cents on Friday, the highest in three years.
On-warrant LME aluminium inventories, those not earmarked for delivery, rose 6,675 tonnes, but more inflows were expected, industry sources said. The April LME aluminium contract rose to a premium of $12 a tonne to the three-month futures, up from $7.25 on Tuesday and compared to a discount of $15.75 on Friday. The rising premium indicates short supply of nearby material.
LME nickel added 1.2 percent to $13,865, as traders worried about a possible knock-on impact from sanctions, since Rusal owns a 28 percent stake in Norilsk Nickel. LME copper ended barely changed at $6,950, zinc fell 0.1 percent to $3,239, lead added 0.7 percent to $2,409 and tin rose 0.65 percent to $21,000.