LONDON: Aluminium prices were on track to register their biggest quarterly gain since 1988 on Thursday, driven up by supply disruptions and increased production costs resulting from Russia’s invasion of Ukraine.

Nickel, meanwhile, headed towards its largest quarterly rise since 2009, helped by a short squeeze on the London Metal Exchange (LME) that caused a price spike this month.

Russia produces about 6% of the world’s aluminium and 10% of its nickel, along with other metals, energy and grains.

Sanctions against Russia have cut or complicated shipping routes and driven up the price of energy used to power smelters - with Russian demands for gas payments in roubles raising new supply fears in Europe this week.

High power costs had already forced some aluminium and zinc smelters in Europe to reduce output.

Benchmark aluminium on the LME was down 1.6% at $3,493 a tonne at 1615 GMT on Thursday but up 24.4% this quarter.

LME nickel was down 2% at $32,250 and up around 55% over the quarter.

Both metals reached record highs in March, though nickel’s was later cancelled by the LME as it sought to stabilise the market after a savage price spike on March 8.

Metals prices are likely to rise further as inflation pushes investors towards commodities, with tight supply of industrial metals and the risk of further sanctions constraining Russian supply also boosting prices, said ING analyst Wenyu Yao.

“Upside risk will dominate in the next few months,” she said.

Among threats to demand are measures to contain the spread of COVID-19 in China, the biggest metals consumer. Chinese factory activity contracted in March, but the government says it will prop up economic growth.

LME copper was up 0.1% at $10,374 a tonne on Thursday and up about 6% in the first quarter. Prices reached a record high in March.

Zinc rose 0.5% to $4,169.50 and was up about 18% for the quarter after also hitting a record peak in March.

Lead fell 0.3% to $2,410 and has gained about 5% in the first three months of 2022.

Tin was up 0.8% at $42,840 and up 10% in the first quarter, having reached a record high in March to help it towards an eighth consecutive quarterly gain.