Aluminum yesterday surged to a six-year high as the impact of US sanctions against United Co Rusal continued to reverberate through the global market more than a week after they were announced, with buyers rushing to secure supplies amid forecasts that the price could hit US$3,000 a tonne.
The metal, used to make everything from cans and cars to airplanes, reversed an early drop to gain as much as 1.5 percent to US$2,435 a tonne on the London Metal Exchange, the highest intraday price since September 2011.
It traded at US$2,429 at 7:52am in London, extending Monday’s 5 percent jump.
The aluminum market is in turmoil following the US action against Russia’s Rusal, which has unleashed a supply shock that is still unfolding as the company accounts for about 17 percent of worldwide production outside China.
The Russian supplier has been shut out of the Western financial system, lacerating its share price while boosting rivals.
Rio Tinto Group, South32 Ltd and Alumina Ltd are among the potential beneficiaries, UBS Group AG said.
“The market is looking at US$2,800, US$3,000,” CRU Group analyst Jackie Wang said from Beijing.
There are concerns about possible production cuts by Rusal, either because its sales are blocked or the raw material supply chain is affected, Wang said.
LME prices last topped US$3,000 in 2008.
Rusal’s shares rose in Hong Kong after losing more than half their value last week.
Russia would not inject sovereign bonds into Rusal’s capital as the country does not use local-currency sovereign bonds and any public debt to support companies under sanctions, the Russian of Ministry of Finance said.
Shares in rival suppliers gained again, including China Hongqiao Group Ltd (中國宏橋集團), which added as much as 3.4 percent in Hong Kong.
In Australia — Alumina Ltd, a partner with Alcoa Corp in the world’s largest bauxite and alumina producer — advanced as much as 4.1 percent before closing level.
Prices of alumina, the semi-processed material used to make aluminum, are rocketing. India’s National Aluminium Co sold a cargo of alumina last week at US$601 a tonne free-on-board, the highest level at which Nalco has sold in 12 years, chairman T.K. Chand said on Monday.
The sanctions have thrown an estimated US$3 billion of aluminum produced by Rusal into limbo as metal produced by the company accounts for more than one-third of holdings in warehouses monitored by LME.
The exchange has banned, with effect from yesterday, deliveries of Rusal-branded metal into its sheds.
Russia produces about 6 percent of global aluminum supply and any move to extend the scope of sanctions to nickel could see an more significant impact as the nation contributes 10 percent of supply, UBS said in a note.
However, including copper would have a smaller impact as Russia accounts for 4 percent.
While Russian aluminum supplies are getting shunned, China continues to churn out the metal.
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