LME aluminium pares gains on caution over Russia-Ukraine crisis

London aluminium prices pared gains on Wednesday, after jumping as much as 5.2% earlier in the session, as traders maintained a cautious stance following a worsening conflict in eastern Europe and mounting sanctions on major supplier Russia.

Three-month aluminium on the London Metal Exchange was up 0.8% at $3,526 a tonne, as of 0600 GMT, after dropping 1.2% to $3,455 in a volatile session.

“There’s a lot of fear so market participants and market makers are standing out of the way hence there’s no liquidity even on the three-month aluminium,” a Singapore-based trader said.

The United States banned imports of Russian oil in a new step to halt the war by crippling Russia’s economy, while it faces further economic sanctions from the West for invading Ukraine. Russia calls its actions in Ukraine a “special operation”.

The conflict and ensuing sanctions have played havoc with global supply chains, sending prices soaring across the commodities market.

Russia produces about 6% of the world’s aluminium and supplies nearly 10% of its nickel needs. It is also a major producer of natural gas used to generate electricity that powers production of metals such as aluminium and zinc.

Meanwhile, the LME suspended nickel trading on Tuesday, after prices doubled to more than $100,000 per tonne in a surge sources blamed on short-covering by one of the world’s top producers.

LME does not anticipate resuming nickel trading before March 11.

China’s Shanghai Futures Exchange said on Tuesday it will take further measures to account for market conditions amid nickel price volatility in overseas futures markets, as one brokerage warned investors that they could be forced to reduce their positions.

Fundamentals

• LME copper edged 0.3% higher to $10,239 a tonne, lead gained 1.6% to $2,539.5, zinc fell 0.7% to $4,107 and tin slipped 3% to $47,165.

• The most-traded April copper contract on the Shanghai Futures Exchange fell 1.1% to 72,690 yuan ($11,500.31) a tonne.

• ShFE aluminium slipped 5% to 21,905 yuan a tonne, zinc fell 3.8% to 25,990 yuan, lead dropped 1.8% to 15,430 yuan and tin rose 1.2% to 359,960 yuan. Nickel hit daily price limit of 17% to a record 267,700 yuan a tonne in early trade.

• Stocks of aluminium in LME-registered warehouses were at 779,350 tonnes, hovering near their lowest levels since 2007. However, the discount of LME cash aluminium to the three-month contract has expanded to $27.50 a tonne, widest since June 2021.