LONDON (Reuters) – The initial sanctions shockwaves may have passed but the aluminium market is still structurally stressed by the U.S. Treasury’s action against Oleg Deripaska and his Rusal aluminium empire.
The price explosion after the original April 6 sanctions announcement went into reverse on April 23, when the U.S. Treasury extended the deadline until October and held out an olive branch to Rusal (but not Deripaska).
After hitting a seven-year high of $2,718 per tonne on April 19 the London Metal Exchange (LME) aluminium price has retreated to a current $2,268. The market seems to be betting that Deripaska’s offer to reduce his stake in and remove himself from Rusal will result in a swift lifting of the sanctions that have roiled the supply chain.
However, the tensions caused by the partial lock-out from the global market of the largest producer outside of China are still evident. LME time-spreads are contracting again and huge tonnages of stocks are being flipped around against a backdrop of tightening physical markets.
The storm has abated but it may not yet be over. LME aluminium time-spreads went super-tight in the days after the original sanctions announcement, the cash-to-three months period flexing out to a $56-per tonne backwardation, a level not seen in many, many years.
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