April 17, 2018 / 3:36 AM / in 2 years

METALS-Aluminium extends rally, hits strongest since 2011 on supply woes

 (Updates prices)
    By Manolo Serapio Jr
    MANILA, April 17 (Reuters) - London aluminium futures
climbed more than 1 percent to their highest in nearly seven
years on Tuesday, buoyed by growing worries over tighter supply
in the aftermath of U.S. sanctions on major Russian producer
    Concerns over the impact of the sanctions, which began on
April 6, have pushed up aluminium prices in London by over 20
percent so far this month. Aluminium futures in Shanghai rose to
their strongest in almost three months.
    Benchmark aluminium on the London Metal Exchange was
up 1.1 percent at $2,425.50 a tonne by 0726 GMT, after earlier
hitting its strongest since September, 2011 at $2,435.
    "We think an aluminium price of around $2,250/tonne is fair,
as it takes into account the impact of Rusal's displaced
aluminium," Commonwealth Bank of Australia analyst Vivek Dhar
said in a note. Rusal accounts for 6-7 percent of global
aluminium supply. 
    "But an overreaction was always on the card as buyers look
to secure aluminium in the short term."
    SHANGHAI ALUMINIUM: The most-traded June aluminium contract
on the Shanghai Futures Exchange rose as far as 14,985
yuan ($2,387) a tonne, its highest since Jan. 29. It closed up
2.4 percent at 14,920 yuan.  
    SUPPLY SHORTAGE: The global aluminium market could face
supply shortages because of U.S. sanctions on Russia and Norsk
Hydro's production cuts in Brazil, Hydro's chief
executive told Reuters.
    FILLING THE VOID: "Other players will almost certainly step
in to fill the void, but almost all producers, apart from
Chinese ones that are arguably being held back, are currently
operating flat out and so it is hard to see where the extra
production will come from, at least over the short term," INTL
FCStone consultant Edward Meir said.
    RIO TINTO: Apart from saying it would declare force majeure
on certain customer contracts, Rio Tinto said
last week it was reviewing Rusal's 20 percent stake in
the Queensland Alumina refinery, Rusal's supply and offtake
arrangements, bauxite sales to Rusal's refinery in Ireland and
offtake contracts for alumina.
    GLENCORE: Also last week, a source told Reuters that Swiss
trader Glencore will declare force majeure on some
aluminium supply.
    CHINA GDP: China's economy grew 6.8 percent in the first
quarter of 2018, slightly faster than expected, buoyed by strong
consumer demand and surprisingly robust property investment
despite continued measures to tame rising home prices.

    COPPER: London copper was off 0.3 percent at
$6,888.50 a tonne and its Shanghai counterpart rose 0.8
percent to end at 50,820 yuan.
    CHINA STEEL: Chinese steel producers ramped up output in
March to the highest level since September, with mills in the
world's top market for the metal rushing to boost operations
after winter restrictions to prevent smog were lifted in the
middle of the month.
    MARKETS: Asia stocks wavered after data showed both hot and
cold patches in the Chinese economy, but losses were limited as
investors turned their focus to corporate earnings from Syria.
 BASE METALS PRICES                           0726 GMT
 Three month LME                                6888.5
 Most active ShFE                                50820
 Three month LME                                2425.5
 Most active ShFE                                14920
 Three month LME zinc                             3144
 Most active ShFE zinc                           23680
 Three month LME lead                           2355.5
 Most active ShFE lead                           18140
 Three month LME                                 14265
 Most active ShFE                               103790
 Three month LME tin                             21090
 Most active ShFE tin                           144960
 BASE METALS ARBITRAGE                                
 LME/SHFE COPPER        LMESHFCUc3              472.08
 LME/SHFE ALUMINIUM     LMESHFALc3            -2735.99
 LME/SHFE ZINC          LMESHFZNc3              151.01
 LME/SHFE LEAD          LMESHFPBc3               79.52
 LME/SHFE NICKEL        LMESHFNIc3            -1731.31
 ($1 = 6.2790 Chinese yuan)

 (Reporting by Manolo Serapio Jr.
Editing by Joseph Radford and Gopakumar Warrier)
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