Aluminum, producer stocks surge as US weighs Russia ban

Aluminum (Representative Image)

Aluminum and shares of metal producers soared following news the Biden administration is considering a ban on Russian aluminum in response to Russia’s military escalation in Ukraine.

Metal products from Russia have so far been shielded from sanctions due to their importance in everything from automobiles and skyscrapers to iPhones. The White House is eyeing three options: an outright ban, increasing tariffs to levels so punitive they would impose an effective ban, or sanctioning the company that produces the nation’s metal, United Co. Rusal International PJSC, according to people familiar with the decision-making.

Such a move would have wide-reaching repercussions for the globally traded aluminum market, potentially forcing consumers in the US and other countries into a rush to find replacement metal. Russia accounts for 5% of global aluminum production.

Aluminum traded on the London Metal Exchange soared as much as 7.3% -- one of the biggest intraday moves on record -- before settling 3.1% higher to $2,305 a metric ton, while shares of Alcoa, the largest US producer, closed 5.3% higher after gaining as much as 8.6% in New York trading.

Other main LME metals were mixed, with copper down 0.7% and nickel up 1%.

Copper’s decline came after two days of gains as global recession fears mounted and Chinese demand for the metal showed further signs of weakening.

Often regarded as a barometer of the global economy, the industrial metal has been weighed down by relentless interest-rate hikes by the Federal Reserve, dropping about 30% from its March peak.

Minutes from Fed officials’ September meeting showed they were committed to raising rates to a restrictive level in the near term and holding them there to get inflation back to their target, though several said it would be important to “calibrate” hikes to mitigate risks. That offered hopes of some dovishness from the Fed down the road.

In China, spot copper contracts slumped to a discount to local futures prices for the first time in more than two weeks, signaling caution from buyers, according to broker Everbright Futures Co. There are further signs that Beijing intends to persist with its Covid Zero policy, undercutting expectations that a flailing economy would push the government to end or loosen restrictions later this year.

Copper supply has been under extreme stress in China as the virus curbs stranded some metals at smelters or in transit, said Jia Zheng, a trader at Shanghai Dongwu Jiuying Investment Management Co.

The spread between the two nearest contracts on the Shanghai Futures Exchange has widened to more than 1,000 yuan ($139.43) a ton, the most since 2007, a sign supplies are tight.