Chart of the week: Above all, sanctions against Russia and also the misfortune in Guinea led to an increase in the price of strategically important aluminum.
Aluminum prices are on the rise again and have reached the level of $2,600 per tonne. The main reason is the sanctions on Russian metals, which can disrupt the availability of key industrial metals. The United States and Great Britain have banned the supply of Russian aluminum to the London Metal Exchange (LME). However, explosions at bauxite deposits in Guinea also contributed to the price increase.
In addition to aluminum, these restrictions also apply to nickel and copper – in all three cases, these are key metals for the so-called green transition. It is possible that Western countries will be concerned about buying aluminum from Russia outside of the London Metal Exchange. The United States believes that the ban on the entry of Russian metals to the LME will lead to the fact that Russian companies will have to supply metals only to countries that do not sanction Russia (which is, of course, the vast majority of the world) and that they will have to provide a discount. Last year, China was one of the largest buyers of Russian aluminum.
Metal prices on the LME form a so-called benchmark, so they serve as a basis for contracts around the world.
Sanctions, however, may disrupt the dominance of the LME – prices on this exchange may begin to differ even more significantly from prices in real contracts precisely because of these restrictions. In all three metals, Russia has a significant global position – it accounts for 6% of world production of nickel, 5% for aluminum and 4% for copper.
