Aluminum jumps to record high as Russian attack boosts supply risks

Aluminum rallied to a record in London and nickel surged to the highest in more than a decade, pacing gains in industrial metals markets, as the deepening Ukraine crisis added to supply risks in an industry already facing critical shortages.

The gains will heap fresh inflationary pressure on buyers who use aluminum in everything from cars and cables to drinks cans, and the threat of disruption will be particularly troubling for manufacturers in Europe who buy large volumes of specialist products made from it that come from Russia.

U.S. President Joe Biden warned that Russia faces "severe sanctions" after his counterpart Vladimir Putin ordered a military attack on Ukraine. That raises the possibility of measures that could affect Russian supplies of aluminum, as well as other commodities.

Aluminum jumped as much as 4.8 percent to $3,449 a ton on the London Metal Exchange, surpassing a previous record set in 2008, while nickel surged to the highest since 2011. Copper edged lower, as the military action sparked a selloff in risk assets across financial markets.

"The market will be monitoring whether this will disrupt Russia's shipments of aluminum ingot to Europe," said Zhong Mingzheng, an analyst with Jinrui Futures. Any disruptions to the country's natural gas exports might also hamper aluminum production by raising energy costs at European smelters, she said.

European power prices jumped 15 percent and the region's benchmark gas contract spiked as much as 41 percent on Thursday, far exceeding the gains seen in most industrial metals. Even with aluminum prices at a record-high, the surge in energy prices means some smelters remain unprofitable.

U.S. sanctions on major producer United Co. Rusal International PJSC in 2018 sent prices soaring about 30 percent and sparked a frenzied hunt for alternative metal. The penalties were lifted after billionaire Oleg Deripaska agreed to reduce his ownership and relinquish control.There is no guarantee that the situation in Ukraine, or any planned sanctions by the U.S. or Europe, will affect aluminum or any other metal. Russia is also an important producer of nickel, palladium and copper.