Aluminum hits 2-month peak as LME imposes restrictions on Rusal metal

LONDON — Aluminum prices surged to the highest in over two months on Tuesday after the London Metal Exchange (LME) imposed restrictions on metal from Russian producer Rusal due to US sanctions.

Benchmark LME aluminum was 4.2% higher at $2,229 a ton by 1631 GMT in electronic trading after touching a peak of $2,242, the highest since Jan. 29.

It was the longest winning streak of LME aluminum since December. LME aluminum finished up 2.9% at $2,201 in closing open outcry trading before the LME released its notice.

LME Chief Executive Officer Matt Chamberlain said the exchange will take steps to keep aluminum produced by Rusal and sold after the company was placed on a US sanctions list out of its warehouses. The US imposed major sanctions on Friday against Russian entities and individuals, including Russian aluminum giant Rusal, in one of Washington’s most aggressive moves to punish Moscow.

“It’s quite clear that the sanctions could lead to lower production from Russia and Rusal is a big enough producer to move prices,” said Capital Economics commodities economist Caroline Bain.

Rusal produced 3.7 million tons of aluminum last year, which according to brokers Argonaut was about 7% of the world total.

Premiums for aluminum in the US climbed to 19.50 cents per pound, the highest levels since March 2015, on expectations of tighter supply.

Aluminum stocks in LME approved warehouses originating from producers in Eastern Europe accounted for 36% of the total, data from the exchange showed on Monday. Sources say this category would mostly be metal produced by Rusal. There were 24,875 tons of fresh cancellations of LME inventories on Tuesday, signaling that metal was due to be moved out of warehouses. ING said in a note that metal would “likely to be sold for rising premiums.”

LME cash aluminum flipped from a discount on Friday of $ 20.50 per ton to the three month contract to a premium of $ 16 on Monday, indicating a shortage of material for immediate delivery. On Tuesday the premium evaporated and the two contracts were at parity.

Copper gained 1.7% to end at $6,945 per ton in closing rings, the highest since March 16. The copper market will slip into a deficit in the 2020s after being in balance for rest of this decade, Rio Tinto’s copper chief said on Tuesday.

Zinc rose 1% to finish at $3,243, lead added 0.30% to $2,392, tin fell 1.4% to $20,875 while nickel climbed 1.9% to $13,695. —