London, UK – Metal prices experienced a significant surge following the introduction of sanctions by the UK and US, targeting new Russian supplies of key industrial metals. Aluminium, nickel, and copper all saw notable increases in response to the restrictions imposed on trading activities involving Russian metal on major exchanges.
Aluminium, a crucial component in various industries including aerospace and construction, witnessed a remarkable surge of 9.4% in its largest intraday gain since the contract’s inception 37 years ago. Nickel, essential for electric vehicle batteries and steel production, also experienced a 1.5% increase in its price.
The actions taken by the British and US governments to prohibit the delivery of new Russian supplies to the London Metal Exchange and the Chicago Mercantile Exchange led to copper prices rising by 1.6% to reach $9,604 per tonne, marking a 22-month high. These sanctions have created anticipation of a tighter market due to the limited availability of Russian metal.
With Russia being a significant producer of aluminium, copper, and nickel, comprising a notable portion of global supply, the sanctions are expected to have a substantial impact on the metals market. The London Metal Exchange announced that Russian metal produced after April 13 would not be allowed in its warehouses, aiming to address the oversupply issue stemming from a buildup of Russian supplies.
Analysts predict that the sanctions will result in higher prices for exchange-traded metals and lead to a larger discount for newly produced Russian metal. Tom Mulqueen from Citi highlighted that the dominance of Russia-origin metal in LME inventories had been influencing pricing dynamics, with the new measures aiming to rectify this imbalance.
Despite the restrictions, Russian companies like Rusal, one of the largest aluminium producers, remain optimistic about their ability to meet global demand for Russian metal. Rusal emphasized that its logistics, production, and quality systems remain unaffected by the sanctions, allowing for continued supply to the global market.
Looking ahead, analysts anticipate that countries like China, India, and Turkey may absorb any excess Russian metal that Western consumers avoid due to the sanctions. The impact of the restrictions on the global metals market remains to be seen, with market players closely monitoring developments in light of the geopolitical tensions surrounding Russian supplies.