JOHANNESBURG - Aluminium has surged to a six-year high this week after the imposed sanctions on Russia’s producers such as Rusal.
The sanctions, which are expected to disrupt global supply, pushed the prices for the base metal to $2 428 a ton level on Tuesday from $2 315 a ton on Monday.
Aluminium is used aluminium in a huge variety of products including cans, foils, kitchen utensils, window frames, and airplane parts.
Eduan Hauman, head of base metals at Cape Town-based Afriforesight, on Friday said that the aluminium price had already increased more than 27 percent since April.
Hauman said the rise has put the metal at its highest level since August 2011.
He said there could be further momentum as customers of Rusal, which supplied 6 percent of the world’s aluminium, scramble to find alternative supplies of the metal, adding that supplies may come from China, which already produced more than 55 percent of the world’s aluminium, had excess inventories and massive production capacity. “There are also signs that Rusal is trying to arrange for its aluminium to be exported to China to circumvent the US sanctions,” Hauman said. “We therefore anticipate that alternatives eventually will be found for the disrupted aluminium supply, allowing prices to fall back to April levels by the the third quarter of 2018.”
The US imposed the sanctions after accusing Russia of "malign activity around the globe”.
According to reports its billionaire owner, Oleg Deripaska, was sanctioned for threatening the lives of business rivals, bribing government officials and having links to organized crime, among others. Rusal is the world’s biggest aluminium producer outside of China.
Aluminium has been under strain not only because of the sanctions but also because Trump slapped a 10 percent import duty on the base metal in a move to protect the domestic market.
Prices are expected to peak at $3 000 a ton in the near term, according to the Goldman Sachs Group.
Trump has also threatened to levy further tariffs on Russia following the recent chemical weapons attack in Syria.
Other analysts said that the JSE-listed South32, which produces aluminium in South Africa and Mozambique, was expected to be one of the companies set to benefit from the sanctions.
The company, which was spun off from BHP Billiton closed at R35.54 a share 5.43 percent higher on Wednesday from R33.71 a share on Tuesday. The share was 1.50 percent firmer on the JSE on Friday to trade at R36.50 a share.
In addition to the 10 percent import levy on aluminum the US, last month also announced a 25 percent tariff on steel in a bid to protect the country’s industry.
The Department of Trade and Industry last month said that the South African government had made a formal submission to the US government requesting the exclusion of South Africa from the imposition of Section 232 duties on steel and aluminum.
Seleho Tsatsi an investment analyst at Johannesburg based Anchor Capital Markets, said South32 was the most exposed of the diversified miners to aluminum. “About a third of 2017 financial year operating profit was from its aluminum division,"said Tsatsi.
Hauman said there was some cause for concern over alumina the material from which aluminium is produced as the world’s largest of alumina refinery, Alunorte in Brazil, has been running at half its capacity since late February 2018 due to a wastewater spill.
“This affects about 3 percent of global alumina production and caused upward pressure on prices due to uncertainty how long the production curb will remain in place”.