Metal prices are spiralling on fears of strain in global supply chain due to US sanctions on Russian firms. Nickel futures in Shanghai surged to the highest in almost three years on Thursday. The metal on Shanghai Futures Exchange surged 5.9 per cent to 109,790 yuan ($17,490) a tonne, its strongest level since June 2015.
Aluminium rallied as much as 7.1 per cent, a record intraday gain, to $2,718 a tonne in London. Since the start of April, prices are up more than 30 per cent.
“It really is unprecedented,” said Keith Wildie, head of commodity volatility at London-based brokerage Vantage Capital Markets. “I certainly can’t remember a time in base metals where the markets have been moving like this.”
Analysts said worries that US sanctions could hit Russia’s Norilsk Nickel, the world’s second biggest nickel producer, led to a spurt in nickel prices. Nickel on LME surged to three-year high on Wednesday with the London Metal Exchange announcing a move to delist two brands from Russia’s Norilsk Nickel that accounts for about 9 per cent of global nickel supply.
Aluminium was seen trading at $2,626.50 at LME, up 3.5 per cent. Strained global supply following the US sanctions on major Russian producer Rusal is cited as a reason rising prices. The clampdown on Rusal, the largest aluminium supplier outside China, has set off a rush for alternative supplies and stirring concern that further US action could affect other markets like nickel.
The US sanctions on Rusal, which had begun on April 6, also left its impact on LME copper, which soared more than 1 per cent to $2,572 a tonne at LME in early Asian deals, its loftiest since August 2011.
Metals market analysts said supply worries from the Philippines, coupled with upbeat data from the US, kept base metals up. This, in turn, raises earnings prospects for metal makers. The Philippines is the world's biggest supplier of nickel ore and also among the top producers of copper and gold.
Taking cues, metal stocks in India rallied. Hindustan Copper surged 11.76 per cent to Rs 79.80, Hindalco jumped 9.04 per cent to Rs 264.75, Nalco rallied 8.86 per cent to Rs 87.25 and Vedanta rose 7.08 per cent to Rs 311.70 at close of trade on the National Stock Exchange. Nifty metal index outperformed broader index by rising 4.52 per cent to 3,920.15 while Nifty gained 0.37 per cent to 10,565.30.
The US sanctions are upending the global supply chain for aluminium, which is used in planes made by Boeing Co and Ford Motor Co trucks.
Rusal is the world’s biggest producer outside China, supplying about 6 per cent of the world’s aluminium. It operates mines, smelters and refineries across the world from Ireland to Jamaica.
“It’s a market in a clear state of panic and uncertainty,” according to Vantage Capital Markets’ Wildie. “Like all periods of market dislocation, eventually it will pass, and the key question now is whether we’re approaching that point. My gut feeling is that we probably are.”