The U.S. sanctions against United Co. Rusal are setting off explosions across global metals markets.
Consumers, manufacturers and traders are scrambling to secure supply cut off by Rusal, the largest aluminum producer outside China. Aluminum reached a six-year high and nickel jumped the most intraday since 2009. Alumina, a raw material needed to make aluminum, notched a fresh record.
“It really is unprecedented in terms of the turmoil it’s unleashed,” Robin Bhar, a metals analyst at Societe Generale SA, said from London. “It’s amazing to watch.”
The U.S. sanctions are threatening to upend the global supply chain for aluminum, which is used in planes made by Boeing Co. and Ford Motor Co.’s F-150 pickup truck. Rusal produces about 6 per cent of the world’s aluminum and operates mines, smelters and refineries across the world from Guinea to Ireland, Russia to Jamaica.
An index of 32 mining and metals companies is heading for a fourth weekly gain. The Bloomberg Americas Mining index rose 2.3 per cent Wednesday, with First Quantum Minerals Ltd. and Freeport-McMoRan Inc. among the biggest gainers, and Alcoa Corp. reaching the highest since 2008.
Aluminum
The metal climbed 5.5 per cent to settle at US$2,537 a tonne at 5:51 p.m. in London. It earlier advanced as much as 6.4 per cent to US$2,559, the highest since August 2011. Goldman Sachs Group Inc. said prices could spike to US$3,000 in the near term.
Rio Tinto Group flagged it may need to cut production in the wake of sanctions. The company is working with customers to minimize disruption and remains in the process of declaring force majeure on some contracts, it said on Wednesday.
Alumina
Alumina is being particularly affected because Rusal is a key producer, with plants in places such as Ireland and Jamaica. Before the sanctions, supply was already constrained by output cuts at Norsk Hydro ASA’s Alunorte refinery in Brazil, the world’s biggest.
A 30,000-tonne cargo of alumina, the crushed ore feedstock which smelters use to produce aluminum, fetched $800 a ton, according to CRU Group analyst Anthony Everiss. The previous record for CRU’s index of alumina prices was US$610 a tonne in 2006.
Nickel
Nickel surged as traders speculated that other Russian companies could be targeted by U.S. sanctions. Bullish sentiment was also boosted after production slumped 18 per cent at Vale SA and BHP Billiton Ltd. forecast higher demand for electric vehicles.
The metal jumped 7.5 percent to settle at $15,275 a ton in London. It earlier climbed as much as 12 per cent to $15,875, the highest since December, 2014.