METALS MORNING VIEW 09/04: Aluminium prices surge on Russian sanctions

Volume has been extremely high at 24,925 lots – the bulk of that has been seen in aluminium (11,180 lots) where trading has been active in response to the United States’ latest sanctions on Russia.

Precious metals are mixed this morning with gold prices off by 0.4%, silver prices are unchanged, while the platinum group metals (PGM) are up either side of 0.5%.

On the Shanghai Futures Exchange this morning, aluminium and copper prices are up by 0.9% and 0.2% respectively, with the latter at 50,480 yuan ($8,005) per tonne, while the rest of the metals are down by an average of 1%.

Spot copper prices in Changjiang are down by 0.3% at 50,330-50,530 yuan per tonne and the LME/Shanghai copper arbitrage ratio has eased to 7.40, from 7.42 on Wednesday last week.

In wider markets, spot Brent crude oil prices are up by 0.4% at $67.27 per barrel and the yield on US 10-year treasuries is lower at 2.79%, as is the German 10-year bund yield at 0.49%.

Equity markets in Asia are for the most part firmer: Nikkei (+0.51%), Kospi (+0.6%), the ASX 200 (+0.34%), Hang Seng (1.26%), although the CSI 300 is weaker (-0.21%), but it had been closed last Thursday and Friday. What is interesting is that Asia’s markets have avoided following last Friday’s weaker performance in western markets, where in the US the Dow Jones dropped 2.34% to 23,932.76, and in Europe where the Euro Stoxx 50 closed down 0.64% at 3,408.10.

The dollar index at 90.17 has slipped back into its sideways trading range following last Thursday’s attempt to move higher. It would take a move above 90.94 to suggest an upside break. The euro is consolidating (1.2272), as are the yen (107.10) and the Australian dollar (0.7676), while sterling is firmer (1.4101). The yuan is weaker at 6.3105, before the holiday it was at 6.3007, while the emerging market currencies we follow remain on a back footing.

Data out already shows Japan’s consumer confidence was unchanged at 44.3 and its economy watchers sentiment climbed to 48.9 from 48.6. Data out later includes German trade balance, EU Sentix investor confidence and UK house prices and retail sales monitor.

Aluminium prices are surging higher on the back of concerns that US sanctions against Russia and key Russian firms, including aluminium producer Rusal, will disrupt supply. The rest of the base metals are for the most part consolidating within recent ranges. The fact Asian equity markets are not following US equities lower suggests traders may be shrugging off that latest rhetoric on US-China tariffs, but we do expect trading to remain nervous. Any let-up in trade tensions may well spark another round of buying from consumers and investors alike, especially as we are now in the second quarter, which is seasonally a stronger period for demand.

Gold prices are stuck sideways, as are silver prices, while the flight in PGM prices of late has halted with some bargain hunting seen. The fact gold prices have not been more bullish, suggests the markets are still reducing risk, but the situation is not so critical to attract safe-haven buying.

Metal Bulletin publishes live futures reports throughout the day, covering major metals exchanges news and prices.