LME aluminium rises as Russia-Ukraine war stokes supply woes

London aluminium prices edged higher on Tuesday, supported by jitters over supply disruption as ceasefire talks between Russia and Ukraine showed no sign of progress, while investors weighed the fallout from record coronavirus cases in top consumer China.

Three-month aluminium on the London Metal Exchange (LME) was up 0.3% at $3,532 a tonne, as of 0515 GMT, hovering close to a near two-week high scaled on Monday.

The most-traded May aluminium contract on the Shanghai Futures Exchange eased 0.3% to 22,950 yuan ($3,608.32) a tonne.

Aluminium prices jump on Russian supply worries

“The world is trying to adapt and learn how to accept COVID as part of daily life, and a great example of that is Xi Jinping’s request to tackle COVID with minimal disruption to the economy and society in general,” said Matt Simpson, senior market analyst at City Index.

“The war in Ukraine remains a key pillar of support for metals and has arguably contributed to the bulk of volatility in recent weeks.”

China’s financial hub Shanghai on Tuesday reported a fifth consecutive daily record for locally transmitted COVID-19 asymptomatic cases.

Exacerbating aluminium supply concerns was Australia’s export ban of alumina and aluminium ores to Russia as part of its sanctions against Moscow, while Germany-based TRIMET is also due to cut aluminium production at Essen facility by 50% due to higher energy prices.

Ukrainian President Volodymyr Zelenskiy said on Monday that it would not be possible to negotiate an end to the war without meeting Kremlin leader Vladimir Putin, while the conflict continued for a fourth week.

“World ex-China output is already struggling, and further supply losses are raising prospects for a wider deficit,” analysts at ANZ said in a note.

Stocks of aluminium in LME-registered warehouses were at 704,850 tonnes, its lowest level since 2007. Inventories in Shanghai exchange warehouses fell 4.2% to 333,823 tonnes last week.

Fundamentals

• LME copper fell 0.5% to $10,240 a tonne, lead rose 0.4% to $2,267, zinc was 0.8% lower at $3,907 and tin was up 0.6% at $42,005.

• ShFE copper edged 0.1% higher to 73,220 yuan a tonne, lead was flat 15,255 yuan, zinc rose 1.1% to 25,650 yuan and tin fell 0.9% to 339,100 yuan. The most-traded August nickel contract fell 2.1% to 198,050 yuan a tonne.

• The global nickel market saw a surplus of 6,000 tonnes in January compared with a deficit of 5,300 tonnes in the same period last year, data from the International Nickel Study Group showed on Monday.

• Global primary aluminium output fell to 5.114 million tonnes in February from 5.236 million in the same month in 2021, data from the International Aluminium Institute showed.