Finance Aluminum rockets to a 6-year high after US imposes sanctions on a major Russian producer

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Traders are concerned about supply disruptions.

Screen Shot 2018 04 12 at 11.58.41 AM play

Screen Shot 2018 04 12 at 11.58.41 AM

(Markets Insider)
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  • Aluminum futures on the London Metals Exchange soared to the highest level since 2012 on Thursday.
  • Late last week, the Trump administration announced sanctions on more than a dozen Russian entities, including United Co. Rusal, the world's second-largest producer.
  • Traders are concerned about supply disruptions.

Aluminum surged to a six-year high on Thursday following US sanctions imposed on a key Russian producer.

Last week Friday, the Trump administration announced sanctions on more than a dozen Russian entities, including United Co. Rusal, the world's second-largest aluminum producer.

Futures on the London Metals Exchange jumped by more than 4% to as high as $2,298 a metric ton.

"With an existing large deficit, and around 500kt of China's 2017 supply now subject to +50% duties, the US could find aluminum scarce in 2018, if ex-China supply is less than forecast," Credit Suisse's Matthew Hope said in a note on Thursday.

"To attract sufficient supply, its domestic price might need to climb to the world's highest, via the regional premium, to the detriment of its manufacturers."

The relationship between the US and Russia could be further strained following an apparent chemical weapons attack in Syria. President Donald Trump has condemned Russia and Iran for supporting Syrian President Bashar al-Assad.

"As such, there is a heightened chance that the US will impose further sanctions on Russia," said Thomas Pugh, a commodities economist at Capital Economics, in a note on Thursday.

Pugh added, "The upshot is that the latest round of sanctions on Russia is unlikely to have much permanent impact on commodity prices, although we have revised up our end-2018 aluminium price forecast to take account of the likely short-term disruptions to supply."

Aluminum initially fell in March after President Donald Trump announced tariffs on Chinese steel and aluminum imports, but exempted Canada and Mexico from similar import taxes.

Screen Shot 2018 04 12 at 11.58.41 AM play

Screen Shot 2018 04 12 at 11.58.41 AM

(Markets Insider)