Aluminium prices extend gains on Rusal sanctions

LONDON: Aluminium prices rallied to a five-week high on Tuesday in their longest winning streak since December as US sanctions on Russian producer United Company Rusal fuelled concerns over supply.

Benchmark aluminium on the London Metal Exchange rose 0.5 percent to $2,150 per tonne, after earlier touching $2,157.50, its highest since March 5.

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 for its alleged meddling in the 2016 US election and other "malign activity."

"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.

LME ALUMINIUM: The metal used in beer kegs and aeroplane parts is up about 7 percent so far in London since the sanctions on Rusal were announced on April 6.

RUSAL: Rusal produced 3.7 million tonnes of aluminium last year, which according to brokers Argonaut is about 7 percent of the world total. Rusal says exports to the United States account for over 10 percent of its output.

INVENTORIES: Aluminium stocks in London Metal Exchange approved warehouses originating from producers in Eastern Europe stood at 450,650 tonnes as of April 6, data from the exchange showed on Monday. Sources say this category would mostly be metal produced by Rusal.

On-warrant aluminium stocks fall 24,875 tonnes to 972,000 after fresh cancellations.

SPREADS: The LME cash to three month contract changed from a contango of $20.50 on Friday to a backwardation of $16 on Monday, indicating a shortage of material for immediate delivery. On Tuesday backwardation drifted to $3.75.

"Market participants are inferring the likely ex-China tightness less Rusal to the situation on the LME," ING said in a note.

GLENCORE: Swiss-based trader Glencore said on Tuesday it would not "at this time" be swapping its shares in Rusal for Global Depository Receipts in EN+ due to US sanctions on both firms.

ALUMINIUM: Rio Tinto will be among the biggest winners from the US sanctions imposed on Rusal as the penalties further shake up the global metals trade and raise costs for US consumers, industry sources said on Monday.

OTHER METALS: Copper rose 0.7 percent to $6,878 per tonne, lead fell 0.4 percent to $2,375.50, tin was flat at $21,200, zinc inched 0.4 percent higher to $3,226 while nickel added 1.1 percent to $13,580.