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Aluminum posted its biggest intraday gain since at least 1987, and nickel and copper prices also rose after the UK and US imposed sanctions that effectively ban new Russian supplies of the vital industrial metal from being traded on two of the world's largest exchanges.
Aluminum, which is used to make cans, aircraft and buildings, rose as much as 9.4 percent on Monday, the largest intraday rise since the contract was launched in its current form 37 years ago, before retreating to trade 2.8 percent higher at $2,562. Tons. Nickel, a key component in electric vehicle batteries and the steel industry, rose 1.5 percent.
These moves came after the British and American governments on Friday banned the delivery of new Russian supplies to the London Metal Exchange and the Chicago Mercantile Exchange.
Copper, the third metal covered by the new measures, increased 1.6 percent to $9,604 per ton, its highest level in 22 months, amid expectations of a tightening market as a result of the sanctions.
Russia is a major producer of the three metals, producing 6 percent of the world's aluminum, 4 percent of copper, and 11 percent of high-purity nickel, according to Citigroup.
The London Metal Exchange said on Saturday that it would not allow Russian metal produced after April 13 to be stored in its warehouses. It added that supplies of Russian origin produced before that date could still enter the LME warehouse system but would be classified under a separate category.
The world's largest metals market is struggling with a buildup of stockpiles of Russian supplies, which were already seen as junk. Aluminum was the most extreme, with more than 90 percent of stocks being of Russian origin, leading to concerns that price benchmarks may not reflect true global prices.
Tom Mulqueen, an analyst at Citi, said the sanctions would lead to higher prices for exchange-traded metals and create a greater discount for newly produced Russian metals.
“Prior to this ban, the metal of Russian origin increasingly dominated LME inventories, so pricing increasingly reflected the base discount for these less attractive Russian units,” he said in a note. “The new measures taken by the LME should reflect this.”
The latest sanctions do not prevent Russian companies from rushing to transfer metals produced before April 13 to LME warehouses or conduct bilateral deals independently of metal exchanges.
Rusal, Russia's largest aluminum producer, said on Monday that the latest sanctions would not affect its ability to sell its production because there was still “significant demand” for the Russian metal globally.
“The measures announced have no impact on Rusal’s ability to supply as Rusal’s global logistics delivery solutions, access to the banking system, overall production and quality systems are not affected,” it said in a statement.
Nicholas Snowdon, an analyst at Goldman Sachs, said he expects China, India and Turkey to absorb any Russian metal that the United States, the United Kingdom and other Western consumers are shunning as a result of the restrictions.
