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Aluminum Just Had Its Best Rally Since 1990

Aluminum retreated with other metals, paring its best rally in almost three decades, as investors assessed the implications of U.S. sanctions on United Co. Rusal, the world’s biggest producer outside China. Zinc slumped to the lowest this year.

Aluminum fell 1.6 percent to $2,214.50 a metric ton on the London Metal Exchange, after nearing a six-year high on Wednesday. The metal jumped more than 10 percent in the previous three days as punitive measures against the Russian firm jolted markets. That pushed the 14-day relative-strength index above 70, a sign that gains may be overdone.

The consequences of disruptions to Rusal’s supply — equivalent to about 17 percent of world output outside China — are still to play out. With all parts of the industry assessing their legal and financial exposure to the sanctions, Glencore Plc declared force majeure on some aluminum contracts, people familiar with the matter said. At a conference in the U.S., Roy Harvey, chief executive officer of Alcoa Corp., said probably no one can predict what will happen next, whether in the U.S., China or elsewhere.

“I don’t think we’re at the end of this issue,” Daniel Hynes, senior commodity strategist at Australia & New Zealand Banking Group, said by phone from Sydney. “It’s pretty clear that the risk of disruption to material from Russia is rising. We’re still getting into the real technicalities” in terms of how companies deal with the legal implications, he said.

Aluminum Stockpiles
Stockpiles of aluminum in LME warehouses jumped 7.6 percent on Thursday, one of the biggest increases in the past three decades. The gains came in the Netherlands and took total LME aluminum inventories to the highest since August. The bourse this week said it will won’t allow deliveries of Rusal metal produced after the U.S. announced sanctions.

Zinc extended its decline from the highest in more than a decade in February. Prices lost as much as 4.3 percent to $3,098 a ton, the lowest since December. There’s speculation that China’s State Reserve Bureau plans to release stockpiles, adding to weak fundamentals, according to Wei Lai, an analyst at Cofco Futures Ltd.

All other LME metals declined, with copper losing 2.3 percent and lead falling 2.9 percent.

Source: Bloomberg

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