Supply Disruption Over Rusal Sanctions Lifts Aluminum Prices to Six-Year High

SEATTLE (Scrap Monster): The sanctions imposed by the US on Russian producers, including United Company Rusal Plc, have sent aluminum prices to six-year highs this week. On fears of disruption in global metal supply, the prices surged higher to $2,428 per ton Monday. Incidentally, aluminum prices have soared by over 27% since April this year. The metal prices are now at the highest level since August 2011.

The US Treasury had announced sanctions against Rusal on April 6^th. Consequently, global commodity markets witnessed high volatility in trading tied to the country. The sanction removed as much as 6% of total global supply. Aluminum prices have surged higher by more than 23% since the US announcement. Earlier, the U.S. administration had slapped 10% import duty on aluminum, in a move to protect domestic industry. Also, alumina prices have skyrocketed by nearly 80% since the announcement of sanctions.

The huge price jump in alumina is expected to drive up the costs of aluminum producers globally. In fact, the metals not directly connected to Rusal also felt the impact of sanctions. Nickel privces have had a strong rally. Palladium prices too have increased by almost 13% since the sanctions. The imposition of sanctions on more Russian miners could worsen the situation, analysts noted.

However, the prices are expected to recede from current high levels by the third quarter of this year. The shortage of supply from Rusal is likely to be covered with alternative supplies of the metal, especially from China. It must be noted that China holds huge inventories of the metal. Also, reports suggest that Rusal is in efforts to export its aluminum to China. By Q3, alternatives will be found for disrupted aluminum supply, thereby causing fall in metal prices. Meantime, prices are expected to peak in the near term.