Aluminum Extends Rally After Exchanges Ban Rusal Metal
April 11 2018 - 7:17AM
Dow Jones News
By David Hodari
Aluminum futures pushed higher on Wednesday, extending their
rally as White House sanctions on Russian companies continued to
ripple through the market.
The industrial metal was up 2.6% at $2,267 a metric ton in
late-morning trading in London--matching its year-to-date
high--having risen 10.5% so far this week.
In other major metals markets, copper edged down 0.1% to $6,963
a metric ton, and gold ticked up 0.3% to $1,344.61 a troy
ounce.
Aluminum's gains intensified late Tuesday after the London Metal
Exchange fell in line with U.S. sanctions on Russian individuals
and announced a "temporary conditional suspension" on metal from
the world's second-largest aluminum producer, United Co. Rusal.
While the LME's ban takes effect April 17, CME Group Inc.'s
Comex index also announced on Tuesday that it had "revoked the
approved status for registration for delivery, and delivery of" 11
aluminum brands from its exchange "with immediate effect." Of those
11 brands, six were from Rusal and all were Russian.
Rusal was one of 12 companies owned by seven Russian tycoons
that the U.S. government sanctioned last week over Russian activity
around the world including military interventions in Ukraine and
Syria and cyberattacks. The sanctions froze the U.S. assets of
those targeted and prohibited Americans from doing business with
them.
The LME's move was "completely [down to] political pressure [as]
the LME cannot be seen to be doing business with a company that has
sanctions placed on it," said Geordie Wilkes, head of research at
Sucden Financial Limited.
Aluminum's leap between Friday and Tuesday marked its hottest
three-day streak since 2009, said John Meyer, an analyst at SP
Angel.
Tuesday's announcement from the LME was a departure from the
exchange's initial divergence from Washington, and was "a game
changer," according to analysts ING in a note.
Many in the market had previously warned that the LME's earlier
decision not to echo sanctions on Russia would prompt a divergence
between various local premiums around the world. The LME's
about-turn on the matter meant that was no longer as likely.
"We could now see a rush of Rusal stock on to the LME, and
thereafter all eyes are on the Shanghai Futures Exchange-London
Metal Exchange arbitrage... as it becomes profitable for China to
export," ING added.
China is relatively insulated from the supply anxieties rattling
aluminum markets, as the country is largely self-sufficient in
aluminum production.
Investors were bracing for further tremors.
"Rusal metal is likely not to be deliverable to the LME and if
this is the case... we would expect to see the rally continue,"
Sucden's Mr. Wilkes said.
Still, there might be some temporary volatility. "Traders can
only deliver Rusal metal if they can prove that it was produced and
supplied before April 6th," when the U.S. announced its sanctions,
Mr. Wilkes said.
Among precious metals, silver was down 0.24% at $16.53 a troy
ounce, platinum was up 0.20% at $931.15 a troy ounce and palladium
was up 0.18% at $957 a troy ounce.
Among base metals, zinc was up 0.03% to $3,250.50 a metric ton,
tin was up 0.53% at $21,025 a metric ton, nickel was up 0.29% at
$13,780 a metric ton and lead was up 0.17% at $2,392 a metric
ton.
Write to David Hodari at David.Hodari@wsj.com
(END) Dow Jones Newswires
April 11, 2018 07:02 ET (11:02 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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