Supply concerns, weaker dollar push aluminum to highest since 2011

LONDON — Aluminum prices rallied to their highest since 2011 on Monday as the dollar fell and Rio Tinto declared force majeure on some customer contracts after the US imposed sanctions on its Russian partner Rusal.

Benchmark aluminum on the London Metal Exchange (LME) closed 5% higher at $2,399 per ton after earlier touching its highest since September 2011 at $2,403.

The metal, with uses as diverse as in beer kegs and aeroplane parts, also recorded its biggest one- day jump since November 2011.

“The main thing that has been a catalyst behind aluminum has been the issues around the sanctions against Rusal which will make the market tighter,” said ETF Securities analyst Nitesh Shah. “In addition to that is the weaker dollar and the general upside for industrial metals in recent days that is working in aluminum’s favor.”

Apart from saying it would declare force majeure on certain customer contracts, Rio Tinto also said on Friday it was reviewing Rusal’s 20% stake in the Queensland Alumina refinery, Rusal’s supply and offtake arrangements, bauxite sales to Rusal’s refinery in Ireland and offtake contracts for alumina.

The global aluminum market could face supply shortages because of US sanctions on Russia and Norsk Hydro’s production cuts in Brazil, Hydro’s chief executive told Reuters on Monday.

Swiss trader Glencore will declare force majeure on some aluminium supply, a source told Reuters on Wednesday last week, while Commerzbank’s head of commodities research Eugen Weinberg said other traders were likely to declare force majeure following the Rusal sanctions.

Total stocks of aluminum rose 15,100 tons to 1.4 million tons. Total stocks are up 9% since the start of the Rusal sanctions on April 6.

The LME will suspend Rusal’s aluminum from its list of approved brands from April 17 after some members raised concerns about settling LME contracts with companies facing sanctions.

The premium of cash to the three- month contract on the LME was at $52 a ton on Thursday, its highest in at least a decade, but nearly evaporated by Monday to above $6.

The US aluminum premium on Comex was at 21.1 cents per pound ($ 465 a ton) on Friday, close to its highest in three years.

Three- month copper ended 1.2% higher at $ 6,910.50 a ton; tin was flat at $ 21,025, zinc gained 0.60% to $3,136.50, lead added 3% to $ 2,370 and nickel rose 2.8% to a two-month high of $14,335 tons. —