Shanghai aluminium rises to 3-mth peak, tracks LME on supply woes

Date 4/17/2018 1:41:17 PM Source: Reuters

        MANILA, April 17 (Reuters) - Shanghai aluminium futures hit their strongest in almost three months on Tuesday amid supply worries after Rio Tinto declared force majeure on some customer contracts after the United States imposed sanctions on the firm's Russian partner Rusal.


The gains in Chinese futures followed another rally in London prices to their highest since 2011 on Monday. London aluminium futures, which have topped $2,400 a tonne, have surged 19 percent this month.


"We think an aluminium price of around $2,250/tonne is fair, as it takes into account the impact of Rusal's displaced aluminium," said Commonwealth Bank of Australia analyst Vivek Dhar 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."


    Benchmark aluminium traded on the London Metal Exchange CMAL3  peaked at $2,403 on Monday, its strongest level since September 2011.


SHANGHAI ALUMINIUM: The most-traded June aluminium contract on the Shanghai Futures Exchange  SAFcv1  rose as far as 14,985 yuan ($2,386) a tonne, its highest since Jan. 29. It was up 1.6 percent at 14,805 yuan by 0309 GMT. 


LME ALUMINIUM: Three-month aluminium on the LME  CMAL3  slipped 0.5 percent to $2,386.50 a tonne, as investors paused for breath after the previous session's rally.


SUPPLY SHORTAGE: The global aluminium market could face supply shortages because of U.S. sanctions on Russia and Norsk Hydro's  NHY.OL  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  RIO.L   RIO.AX  said last week it was reviewing Rusal's  0486.HK  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  GLEN.L  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  CMCU3  was nearly flat at $6,906.50 a tonne and its Shanghai counterpart  SCFcv1  rose 1.1 percent to 50,950 yuan.


    MARKETS: Asia stocks edged higher, tracking Wall Street gains as the focus shifted to corporate earnings and looming economic data from China amid signs Western-led strikes on Syria weren't likely to escalate. The dollar steadied.