Aluminium hits 2-month peak as LME takes action on Rusal metal

LONDON: Aluminium prices surged to the highest in over two months on Tuesday after the London Metal Exchange imposed restrictions on metal from Russian producer Rusal due to U.S. sanctions.

Benchmark aluminium on the London Metal Exchange  was 4.2 percent higher at $2,229 a tonne by 1631 GMT in electronic trading after touching a peak of $2,242, the highest since Jan. 29.

It was the longest winning streak of LME aluminium since December. LME aluminium finished up 2.9 percent at $2,201 in closing open outcry trading before the LME released its notice.

LME CEO Matt Chamberlain said the exchange will take steps to keep aluminium produced by Rusal and sold after the company was placed on a U.S. sanctions list out of its warehouses.

The United States imposed major sanctions on Friday against Russian entities and individuals, including Russian aluminium giant Rusal, in one of Washington's most aggressive moves to punish Moscow.

"It's quite clear that the sanctions could lead to lower production from Russia and Rusal is a big enough producer to move prices," said Capital Economics commodities economist Caroline Bain.

RUSAL: Rusal produced 3.7 million tonnes of aluminium last year, which according to brokers Argonaut was about 7 percent of the world total.

U.S PREMIUMS: Premiums for aluminium in the United States  climbed to 19.50 cents per pound, the highest levels since March 2015, on expectations of tighter supply.

INVENTORIES: Aluminium stocks in LME approved warehouses originating from producers in Eastern Europe accounted for 36 percent of the total, data from the exchange showed on Monday. Sources say this category would mostly be metal produced by Rusal.

There were 24,875 tonnes of fresh cancellations of LME inventories on Tuesday, signalling that metal was due to be moved out of warehouses. ING said in a note that metal would "likely to be sold for rising premiums".

SPREADS: LME cash aluminium flipped from a discount on Friday of $20.50 per tonne to the three month contract to a premium of $16 on Monday, indicating a shortage of material for immediate delivery. On Tuesday the premium evaporated and the two contacts were at parity.

COPPER: Copper gained 1.7 percent to end at $6,945 per tonne in closing rings, the highest since March 16. The copper market will slip into a deficit in the 2020s after being in balance for rest of this decade, Rio Tinto's copper chief said on Tuesday.

OTHER METALS: Zinc rose 1 percent to finish at $3,243, lead added 0.3 percent to $2,392, tin fell 1.4 percent to $20,875 while nickel climbed 1.9 percent to $13,695.