Commodity markets have been shaken by Russia’s invasion of Ukraine and metal stocks are becoming thinner.
from Bloomberg
Published on March 2, 2022
Aluminum broke a record and nickel jumped to an 11-year high as traders prepared to cut off supplies from Russia, a major producer of the two metals, at a time when world reserves were already shrinking dramatically.
Commodity markets have been shaken by Russia’s invasion of Ukraine as large corporations withdraw from the country, creditors withdraw from financial deals and the threat of new sanctions deters buyers. It is also becoming increasingly difficult to transport goods such as metals that are shipped in containers. Nearly half of the world’s container ships will no longer go to and from Russia, according to reports from shipping companies on Tuesday.
At the same time, stocks of materials, including aluminum, tracked by the London Metal Exchange fell to critical levels and fell further on Wednesday. Supplies are particularly limited in Europe, where rising electricity prices have forced smelters to reduce production. Rising premiums in Europe have led retailers to start shipping metal in bulk from warehouses in the Malaysian port of Klang even before the war broke out.
Aluminum rose 3.4 percent and nickel rose 5.6 percent after Shanghai futures jumped early in the evening. Zinc rose by more than 4% due to fears that high energy costs would lead to further downsizing of the smelter. The Russian United Co. Rusal International PJSC is the largest producer of aluminum outside China, and MMC Norilsk Nickel PJSC accounts for about 10% of refined nickel.
“You choose a large supplier in an already tight market,” said Jordi Wilkes, head of research at Sucden Financial Ltd. “We were in the mood for both materials before the conflict. We now see additional gains in the near future. “
So far, Norilsk Nickel supplies have not been significantly disrupted, according to a source familiar with the matter. While some shipowners have refused to transport nickel and a shortage of containers is a problem, the effect is not significant and buyers are still taking the metal, the man said on Wednesday.
Maersk handles some shipments for aluminum giant United Co. Rusal International’s PJSC and the suspension pose a risk to its exports, said a man familiar with the issue earlier in the week.
Large volumes of aluminum, as well as copper, flow regularly from St. Petersburg, Russia, to the European ports of Rotterdam and Vlissingen, and are threatened with disruption as chaos in shipping markets spreads.
LME metal inventories continued to shrink on Wednesday, with aluminum orders jumping 70,700 tonnes, the most since June as metal orders rose in Port Klang. Freely available nickel stocks fell to their lowest level since December 2019.
China’s top government officials, meanwhile, have issued orders to prioritize security of supply of energy and goods, sparked by fears of war interruptions. Russia accounted for almost 18% of China’s refined nickel imports at the end of last year and accounted for about 12% of aluminum supplies.
Aluminum set a new record of $ 3,597 per tonne for the LME before setting 2.6% higher at $ 3,569 at 17:53 on the LME. Nickel rose 3.1%, while copper rose 1%.
“With the help of Archie Hunter and Mark Burton.”