Aluminium rose to nearly a seven-year high this morning as the fallout of US sanctions against Russia's Rusal continue to fuel fears of tightening supply.
Benchmark aluminium on the London Metal Exchange (LME) climbed to a high of $2,435 a tonne, a more than two per cent rise and its highest price since September 2011. Supply concerns have raised London aluminium prices up by more than 20 per cent this month.
"Aluminum’s rally continues uninhibited," said analysts at SP Angel, adding that the market was adapting to the shock of losing supply from a company that accounts for around 17 per cent of global production outside of China.
"As sanctions take immediate effect, the Russian supplier has been shut out of the Western financial system, crushing its share price. The company’s shares have steadied this week in Hong Kong after losing more than half their value since the announcement," SP Angel said.
Guy Wolf, the global head of market analytics at Marex Spectron said Donald Trump's recent tariffs on aluminium were bearish for the price of the metal, but recent US sanctions on Russia, and Rusal in particular, were a "game-changer".
"It essentially means that a large quantity of supply (and inventory) is no longer desirable by many consumers. It is an almost overnight material drop in supply, supply that is of non-sanction affected material.
“So the market has swiftly gone from seeing political decisions as bearish for price to incredibly bullish. That is why the price move is so violent. Of course, this could reverse equally quickly if the effect of the sanctions changes," he said.
The LME is suspending deliveries from any of Rusal's company's brands to LME-approved warehouses, effective from today.