Metal Prices Surge as UK/US Sanctions Target Russian Supply

Key Points:

• Market Volatility: UK and US sanctions against Russian metals triggered sharp price increases in aluminium and nickel.
• Sanctions Intent: Measures aim to curtail Russia's ability to generate revenue from critical metals industries.
• Divergent Market:  Sanctions could lead to higher prices on major exchanges, while Russian metal may trade at a discount.
• Inflation Concerns: Prolonged increases in aluminium prices could contribute to broader economic inflation issues.

The decision by the UK and US to ban new Russian-origin metals trade has sent shockwaves through the global aluminium and nickel markets.  Prices for both industrial metals soared on Monday, with aluminium reaching record highs before stabilising.

Aluminium, used extensively in manufacturing from cars to packaging, saw the most dramatic price surge – up 9.4% at its peak. Nickel, crucial for electric vehicles and steel, also experienced a significant increase. The sanctions create a two-tiered market, likely resulting in higher prices for metals traded on major exchanges, while Russian metal faces deeper discounts.

Sanctions Aim to Curb Russian Revenue

The UK and US justify the sanctions as a measure to deprive Russia of funding for its war in Ukraine. Russia plays a significant role in global metals production, supplying around 5% of aluminium, 6% of nickel, and contributing to copper markets.

Supply Disruption Concerns

While the immediate impact on western supply chains may be modest, a protracted rise in aluminium prices could fuel broader inflationary pressures.

Rusal, Russia's largest aluminium producer, downplayed the sanctions' impact, emphasising its ability to maintain sales due to persistent global demand for its products.