Aluminum extends rally on Rusal supply fears

LONDON — Aluminum 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 aluminum 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 aluminum on the LME surged to a peak of $2,277.50 a ton, the highest since Jan. 24, closing 2.2% higher at $2,250 per ton.

Trader Glencore, a Rusal shareholder and customer, will declare force majeure on some aluminum supply, a source familiar with the matter said. Physical premiums for aluminum deliveries to mainland China from Shanghai Futures Exchange bonded warehouses rose by $5 to $135 a ton.

In the US, the Comex aluminum premium jumped to 20.7 cents a pound ($456 a ton) from 18.4 cents on Friday, the highest in three years.

On-warrant LME aluminum inventories, those not earmarked for delivery, rose 6,675 tons, but more inflows were expected, industry sources said. “LME stocks will go up because if you are a financing bank holding Rusal’s metal, you will be looking to cut that exposure,” a source at a commodity trader told Reuters.

The April LME aluminum contract rose to a premium of $12 a ton to the three-month futures, up from $ 7.25 on Tuesday and compared to a discount of $15.75 on Friday.

LME nickel added 1.2% to $13,865, as traders worried about a possible knock-on impact from sanctions, since Rusal owns a 28% stake in Norilsk Nickel. LME copper ended barely changed at $6,950; zinc fell 0.10% to $3,239; lead added 0.70% to $2,409; and tin rose 0.65% to $21,000. —