Aluminum surges 12% on UC Rusal sanctions

LONDON — Aluminum hit a sixyear high on Friday and posted its biggest weekly gain of nearly 12% since the current contract was launched, after the US imposed sanctions on Russia’s UC Rusal, the world’s second-biggest producer.

Traders have scrambled to stockpile aluminum this week, given concerns that the removal of Rusal metal from the market would further tighten availability.

“If you look at the scope of Rusal supply, they were a very cost-efficient supplier and a very substantial one, and they were well meshed into a lot of other manufacturers downstream,” Natixis analyst Cameron Karami said.

On-warrant aluminum stocks in London Metal Exchange (LME) warehouses, or metal available to the market, fell nearly 100,000 tons, exchange data showed on Friday, almost the same quantity as was added to headline stocks the previous day.

Traders say the aluminium delivered to LME warehouses this week was probably produced by Rusal and that the canceled warrants — material earmarked for delivery and no longer available — are likely to represent metal from other companies.

ALUMINUM PRICES: LME aluminum hit its highest since March 2012 at $2,340 a ton before retreating to close at $2,285, down 1.7%.

Its near 12% gain for the week was still the biggest since the contract was launched in its current form in 1987, according to Reuters data.

RUSAL: US sanctions on Russian entities are hitting companies controlled by tycoon Oleg Deripaska, including aluminum giant Rusal.

RIO TINTO: Mining company Rio Tinto said on Friday it was declaring force majeure on certain customer contracts after the US imposed sanctions on Rusal. Almost all Rio’s aluminum output comes from a joint venture with Rusal in Australia.

US ALUMINUM STOCKS: Almost all the aluminium in the United States was removed from Comex warehouses this week. Stocks tumbled by about 44,000 tons to 11,168 tons.

SPREADS: The rush for stocks was reflected in time spreads on the LME, with the premium on the cash aluminum contract rising to $56 a ton over the three-month future, its highest in at least a decade.

COPPER: LME copper ended the day up 0.10% at $6,830 a ton. The base metals were broadly benefiting from sharper appetite for cyclical assets on Friday, reflected by strength in equities.

OTHER METALS: LME zinc finished up 0.70% at $3,117 a ton, while lead closed down 1.3% at $2,303. Tin ended up 0.70% at $21,050, and nickel finished the day 1.6% higher at $13,940 a ton. —