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Aluminium streaks to record high on supply fears

Aluminium prices bolted to a fresh record peak on Wednesday as investors worried that logistics difficulties would block metals supplies due to tough sanctions on major producer Russia.

Three-month aluminium on the London Metal Exchange surged to a record of $3 552/t before paring gains to trade at $3 532 by 11:00 GMT, up 1.6%.

Aluminium has soared by 37% over the past two-and-a-half months, initially on weaker output due to power issues, and recently has hit successive record highs after Russia’s invasion of Ukraine.

“We’re now seeing the second round effects from the sanctions,” said analyst Daniel Briesemann at Commerzbank in Frankfurt.

“Logistics issues will get even worse and supply problems are on the cards right now.”

Briesemann said he was in the midst of upgrading his metals forecasts and added that he would not be surprised to see aluminium touch $4 000/t.

Sanctions by Western nations have prompted the world’s three biggest container lines to suspend cargo shipments to and from Russia at a time when aluminium inventories are low.

Stocks of aluminium in LME-registered warehouses have more than halved over the past 12 months to 809 750 t versus nearly two-million tonnes in March last year.

Russia produces about 6% of the world’s aluminium and accounts for about 7% of global nickel mine supplies. It is also a major producer of natural gas used to generate electricity.

LME nickel rose 1.6% to $25 510/t, hovering close to a more than ten-year high touched last week.

* LME zinc was the biggest gainer, advancing 3.5% to $3 878, the highest since October.

“The ever rising power prices are pushing zinc prices up because many market players believe that more zinc producers will cut production,” Briesemann said.

* LME copper added 1% to $10 164/t, lead gained 0.8% to $2 428.50 while tin eased 0.2% to $45 700.

* The LME said sanctions announced by the European Union on February 28 against Russian tycoon and metals magnate Alisher Usmanov do not impact any of the LME’s listed brands.

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