LONDON: Aluminium prices fell on Friday for a second day as a rally sparked by US sanctions against Russia's Rusal, the world's second-biggest producer, appeared to stall, but the metal was still on track to end the week up 7.5 percent.
Nickel also moved lower as fears diminished that Washington could broaden its sanctions to include Norilsk Nickel (Nornickel).
Benchmark aluminium on the London Metal Exchange traded 1.4 percent lower at $2,450 a tonne in official rings.
It has soared 22 percent since sanctions on Rusal and its billionaire owner Oleg Deripaska this month forced international banks, miners and exchanges to curb their connections to the company.
Rusal accounted for more than 6 percent of global aluminium supplies estimated at about 63 million tonnes last year.
Aluminium hit a seven-year peak of $2,718 a tonne on Thursday before falling back.
"We are starting to reach fundamental headwinds," said ING analyst Oliver Nugent.
The LME price has risen much faster than prices in China, opening the possibility that China could begin to export metal and fill some of the supply gap left by Rusal.
"It could for the first time be profitable to export Chinese metal. There's a hope and a feeling that China will be able to offset a lot of this void (in aluminium supply)," Nugent said.
The most-traded June aluminium contract on the Shanghai Futures Exchange has risen only about 7 percent since the April 6 sanctions.
Traders were also more optimistic that Rusal might avoid destruction after the Russian government said it could nationalise the company temporarily and rumours circulated that Rusal was talking to Chinese buyers, Nugent said.
TECHNICALS: LME aluminium is expected to test support at $2,348 a tonne, a break below which could cause a loss to the next support at $2,260, said Reuters technical analyst Wang Tao.
POSITIONING: Funds were expanding bets on higher prices, Commerzbank analysts said. "Last week already saw net long positions in aluminium and nickel on the LME increased by 32 percent and 41 percent respectively, and this week they are likely to have been further expanded," they said.
STOCKS: On-warrant stocks of aluminium available to the market in LME-registered warehouses fell to 939,750 tonnes, down about a fifth since Feb. 22 and signalling tighter supply.
NICKEL: LME nickel traded down 2.8 percent at $14,650 a tonne after touching a three-year high of $16,690 on Thursday. It was still up 5.5 percent this week.
OTHER METALS: Copper did not trade in official rings but was bid 0.1 percent lower at $6,980 a tonne, zinc traded up 1.2 percent at $3,260, lead gained 1.5 percent to $2,373 and tin traded 0.7 percent higher at $21,600.
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