Aluminium hit a near seven-year high on Tuesday as the aftershocks from the US sanctions against Russian producer Rusal continued to reverberate through the markets.
On the London Metal Exchange, aluminium for three-month delivery rose as much as 2.2 per cent to $2,435 a tonne, before easing to $2,405.
The metal, which used in everything from drinks cans to cars, has risen almost 19 per cent since Rusal was plunged into crisis by the US sanctions, which were announced on April 6.
The company, controlled by Russian tycoon Oleg Deripaska, has been effectively barred from the western financial system, leaving customers scrambling to find alternative supplies.
Rusal’s aluminium business is almost completely export orientated. Of the 3.7m tonnes it produced last year, only 650,000 tonnes went into the Russian market while the rest was sent overseas.
The latest advance comes as the LME moves to prevent any post-sanctions Rusal metal from entering its system. A ban comes into force later today.
The aluminium market is also being buffeted by a shortage of alumina because of the partial shutdown of the world’s largest refinery of the powder in Brazil, following an environmental accident.
Alumina is a refined white powder, which smelters use to make aluminium.
In February, Brazil’s environment regulator ordered Norsk Hydro, the owner of the Alunorte refinery, to cut its production by 50 per cent, following accusations that it had contaminated local drinking water in Barcarena after heavy rains. As a result, the company has been forced to reduce output from its nearby Albras aluminium plant.
Svein Richard Brandtzaeg, the chief executive of Norsk, said he could not rule out aluminium spiking to $3,000 a tonne.
“There is a lot of concern among customers who are not sure if they are getting alumina or metal,” he said.
Mr Brandtzaeg there was a strong push to solve the problems in Brazil, with Canada, Japan and other countries helping diplomatically.
“We are in a special situation in the global aluminium industry. It is not a situation we have experienced before. There has been oversupply for decades,” he said. “The price of alumina and aluminium is getting higher every day. It’s driven by the fact the supply and demand balance is disturbed.”
Source: FT.com
