LONDON: Aluminium prices extended their rally on Wednesday to a sixth straight session, hitting an 11-week peak, amid persistent worry about shortages after the United States imposed sanctions on Russia's Rusal.
Both the London Metal Exchange (LME) and the CME Group said they were taking action to restrict aluminium brands of Rusal, one of the world's biggest producers, on their exchanges.
"There's a lot of panic and uncertainty. Buyers are scrambling to try to replace where they can, to plug the gap left by not having Russian-origin metal," said Robin Bhar, head of metals research at Societe Generale in London.
"This seems to be just the start (of rallying prices). Given this is a balanced if not tight market I don't see how you can easily replace that missing Russian origin material in the short term."
Three-month aluminium on the LME had surged 3.5 percent to $2,277 a tonne by 1040 GMT, the highest since Jan. 24.
PREMIUMS: Physical premiums for aluminium deliveries to mainland China from Shanghai Futures Exchange bonded warehouses rose by $5 to $135 a tonne on Wednesday.
In the United States, the Comex aluminium premium jumped to 20.7 cents a pound ($456 a tonne) from 18.4 cents on Friday, the highest in three years.
TRADE FLOWS: Traders and warehouse sources said the high premium was attracting aluminium to the United States from tariff-exempt countries that had been stored in Asia, tightening Asian supply.
ALUMINIUM STOCKS: On-warrant LME aluminium inventories, those not earmarked for delivery, rose 6,675 tonnes on Wednesday, but more inflows were expected, industry sources said.
"LME stocks will go up because if you are a financing bank holding Rusal's metal, you will be looking to cut that exposure," a source at a commodity trader told Reuters.
ALUMINIUM SPREADS: The April LME aluminium contract rose to a premium of $12 a tonne to the three month futures, up from $7.25 on Tuesday and compared to a discount of $15.75 on Friday.
The rising premium indicates short supply of nearby material.
CHINESE DATA: Weighing on the broader market was data showing that China's factory-gate inflation cooled to a 17-month low in March, probably indicating an ebbing in demand.
Upcoming Chinese data on money supply, new yuan loans and foreign direct investment will be of greater importance, analysts said.
NICKEL: LME nickel added 1 percent to $13,830. It broke above its downtrend line on Tuesday and is now targeting the $14,000 area, where 555 lots of open interest for May call options sit, Alastair Munro at broker Marex Spectron said in a note.
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