Aluminium surges to record high on fears over Russian supplies

JOHANNESBURG, Feb 24 (Reuters) - Aluminium prices rallied to a record high on Thursday after Moscow launched an attack on Ukraine, sparking fears of sanctions that could cut supplies from major producer Russia and disrupt energy supplies needed to produce the metal.

The invasion of Ukraine by land, air and sea on Thursday was the biggest attack by one state against another in Europe since World War Two and confirmed the West's worst fears.

Russia is a major producer of gas used to make electricity, a major component of aluminium production.

Gas prices have surged since Russia-Ukraine tensions escalated and led to output cuts in Europe, leaving consumers scrambling to secure metal.

Three-month aluminium on the London Metal Exchange (LME) jumped 3.3% to $3,402 a tonne by 1700 GMT after touching a record of $3,480.

"Russia is one of the largest aluminium producers and much of its material goes to Europe. Broader sanctions could tighten up supply even further," said Amelia Fu, head of commodity market strategy at Bank of China International.

"There is concern the impact of sanctions on Russia could feed high energy prices and that would raise production costs for aluminium and other base metals."

Shortages of aluminium can be seen in the duty-paid physical premiums that consumers pay above the LME price, which are at record highs in Europe at $464 a tonne and at $795 a tonne in the United States.

Inventories of aluminium in LME-registered warehouses are also running low at 824,150 tonnes, compared with about 1.3 million tonnes a year ago.

Russia produces about 6% of the world's aluminium and accounts for about 7% of global nickel mine supplies.

Benchmark LME prices for nickel soared 1.7% to $24,800 a tonne, after touching its highest since May 2011 at $25,705.

Nickel prices have also been boosted by sliding stocks in LME warehouses.

The premium for cash nickel over the three-month contract closed at $491 a tonne on Wednesday, close to Tuesday's $645 a tonne, the highest since 2007.

Tin pared gains after touching a record high of $45,880 and was up 0.6% at $45,220.

The material was again flowing from major producer Indonesia, said International Tin Association analyst James Willoughby.

In other metals, copper was steady at $9,871 a tonne, zinc rose 2% to $3,641 and lead was up 1.7% at $2,351.


Published

Zandi Shabalala

25-Feb-2022

REUTERS