(Bloomberg) -- Aluminum headed for the highest close since January, extending its hottest three-day streak since 2009, after top exchanges said they’ll stop accepting metal from United Co. Rusal (HK:0486), deepening supply fears after the U.S. slapped sanctions on the Russian group.
The metal advanced 1.4 percent to $2,231 a metric ton on the London Metal Exchange by 2:56 p.m. in Shanghai. That follows a 10 percent jump since Friday as investors bet that U.S. measures against billionaire Oleg Deripaska’s group would slash global supplies. Both the LME and CME Group Inc (NASDAQ:CME).’s Comex have said they won’t allow new deliveries of Rusal metal.
“I think there’s definitely potential for prices to pass recent peaks,” Helen Lau, analyst at Argonaut Securities Asia Ltd., said by phone from Hong Kong. Aluminum reached $2,290.50 in intraday trading in December, the highest in more than five years. “Imagine how tight the world market is going to be if you lose a 10th of world supply, even for the short term,” Lau said. “More and more companies are responding to the sanctions.”
Aluminum’s rally has fueled gains in producer shares worldwide, while Rusal’s stock has been hammered in Hong Kong. Alcoa (NYSE:AA) Corp., the largest U.S. producer, has climbed more than 20 percent since the close on April 2, before the sanctions announcement. The block on Russian supplies adds to import tariffs, and is poised to make American producers the biggest winners from the latest market jolt. Meanwhile, Rusal shares dropped more than 50 percent this week.
The LME introduced a temporary suspension on placing Rusal metal on warrant with effect from April 17 unless the owner demonstrates it won’t breach sanctions, it said. The bourse set the date on the view that metal warranted before then would have been produced and supplied by Rusal prior to April 6, the day sanctions were announced. Rusal is evaluating the effect of the notice, it said in a statement. Comex said it has revoked the approved status for warranting and delivery of the company’s brands against the futures contract.
Glencore (LON:GLEN) Plc, the world’s largest commodities trader, has said it won’t proceed with a plan to swap its 8.75 percent stake in Rusal for shares in another of Deripaska’s companies, while Chief Executive Officer Ivan Glasenberg has resigned from Rusal’s board. The company, which has a multi-year deal to buy Rusal metal, says it’s evaluating other contracts with the group.
Russian aluminum seen ending up on world market ‘by some means’
Still, there’s no real way that aluminum from Rusal can be prevented from finding its way onto the global market eventually, according to Sanford C. Bernstein analysts. China or any other non-ally of U.S. will likely buy shipments, and there are no means to effectively audit trade flows, they said.
In other LME trading on Wednesday, metals were mixed, with copper down 0.4 percent and zinc up 0.4 percent.
To contact Bloomberg News staff for this story: Martin Ritchie in Shanghai at mritchie14@bloomberg.net.
To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net, James Poole
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