LONDON: Aluminium prices surged to another record high on Monday after Western nations unveiled more sanctions on major producer Russia in response to its invasion of Ukraine, fuelling worries about supplies.
Three-month aluminium on the London Metal Exchange hit a record $3,525 a tonne in high volumes, before paring gains to $3,385 by 1700 GMT, a rise of 0.8%.
Aluminium volumes of 30,419 lots was nearly equal to that of the other main five LME metals combined.
Aluminium has hit successive record peaks recently and is on track to gain 12% in February, the biggest monthly rise since April 2018.
More severe sanctions announced at the weekend included blocking some Russian banks from the SWIFT international payments system, which traders said may disrupt commodities exports from Russia.
“Based on current announcements, there’s no clear sanction that will target metals flows, but increasing numbers of Russian companies are being impacted and that has put the market on tenterhooks,” said Wenyu Yao, senior commodities strategist at ING Bank.
“There are also indirect impacts for zinc and aluminium due to high energy prices. Even though oil and gas are off the table for sanctions, if Putin uses gas to retaliate, there could be more explosive spikes in metals.”
Aluminium is the most energy-intensive metal to produce.
Russia produces about 6% of the world’s aluminium and accounts for about 7% of global nickel mine supplies. It is also a major producer of natural gas used to generate electricity.
LME nickel slipped 0.5% to $24,235 a tonne after having gained 3% earlier in the session.
“It seems that Russia is prioritising its strategic interests over economic sanctions, so the situation runs further risks of escalation,” said Yeap Jun Rong, market strategist at IG in Singapore.
Russian aluminium producer Rusal has halted alumina shipments from its 1.75-Mtpa Nikolaev refinery located close to the port of Mykolaiv in Ukraine, consultancy Wood Mackenzie said on Monday.
LME copper was barely changed at $9,869.50 a tonne, zinc gained 1% to $3,658.50, tin climbed 1.6% to $45,200 and lead added 0.7% to $2,384.50 after touching the highest since last November.
Copper output in Chile, the world’s largest producer of the metal, fell 7.5% year-on-year to 429,923 tonnes in January, data showed on Monday.