LME aluminum and nickel hit multi-year highs due to increased risk of supply disruption in Russia

LME aluminium and nickel prices hit multi-year highs on Tuesday after Russia ordered troops into two breakaway regions of eastern Ukraine, raising concerns about war and sanctions that could affect Russian exports.

17:00 London time (01:00 Beijing time)), LME three-month delivery rose $23.50, or 0.72 per cent, to $3303 a tonne, having previously reached $3380, slightly below the 2008 record high of $3380.15.

Russia accounts for about 6 per cent of global aluminium production and about 7 per cent of global nickel production. Rusal was sanctioned in 2018 and aluminum prices rose 35 per cent in a matter of days.

After rising 42 per cent in 2021, aluminium prices have risen about 17 per cent so far this year.

Three-month nickel rose $209, or 0.86 per cent, to $24558 a tonne after hitting $25135, the highest level since 2011. Nickel, used in stainless steel and electric car batteries, is up about 18% this year, up from 25% in 2021.

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Wenyu Yao, an analyst at Dutch International Group (ING), said that even without Russian exports affected, the two metals were still in short supply.

"they had seen very strong fundamentals before the Russia-Ukraine crisis escalated," she said. "

Germany has suspended certification of a new Russian gas pipeline and Britain has imposed sanctions on Russian banks. Western countries have responded to Russia's recognition of the two breakaway regions of Ukraine and more belligerent goals in a speech by Russian President Vladimir Putin.

U. S. stocks fell and oil prices surged to a seven-year high.

Analysts say western countries are unlikely to impose across-the-board sanctions on Rusal because high aluminum prices hurt manufacturing.

The shortage has caused aluminium stocks in LME warehouses to fall to 835125 tonnes from nearly 2 million tonnes in March last year.

The premium for spot aluminium over three-month contracts is close to its highest level since 2018, while duty-paid physical premiums in Europe and the US have risen to record highs.

Nickel inventories at LME-registered warehouses have fallen to 82314 tonnes from more than 260000 tonnes in April last year, with spot nickel surging to its highest level since 2009 over the premium to three-month contracts.