Aluminum Surges Most Since 2011 on Sanctions; Palladium Climbs

(Bloomberg) -- Aluminum posted the biggest gain in more than six years and palladium jumped amid concerns that supply may be disrupted after the U.S. imposed sanctions against Russian oligarchs including Oleg Deripaska and his United Co. Rusal.

Rusal is the biggest producer of aluminum outside of China. The Moscow-based company also controls about 28 percent of Norilsk Nickel, which operates some of the richest mines in palladium, platinum, and nickel. Russia is the world’s largest producer of palladium, a precious metal used to curb pollution from gasoline-fueled engines.

“What participants on the metal markets are far more concerned about is that the sanctions could also result in supply disruptions,” Commerzbank AG analysts including Daniel Briesemann said in a note Monday. “The costs for U.S. aluminum processors and consumers -- like can manufacturers, for instance -- are likely to rise significantly.”

Aluminum for delivery in three months jumped 4.8 percent to settle at $2,139 a metric ton at 5:51 p.m. on the London Metal Exchange, the biggest gain since November 2011. On the New York Mercantile Exchange, palladium futures for June delivery climbed 4.2 percent to $932.50 an ounce, the biggest rally for a most-active contract in seven months.

Traders are likely pricing in a risk premium amid concern that palladium supply from Russia may be curtailed, Bart Melek, head of global commodity strategy at TD Securities, said in a telephone interview.

International trading houses have stopped buying aluminum from Rusal because of the sanctions, according to executives at five companies that regularly buy from the company, who spoke on condition of anonymity due to the sensitivity of the discussions.

In other metals:

• Nickel, copper and tin also rose on the LME
• Lead and zinc slipped

--With assistance from Tom Wilson

To contact the reporters on this story: Luzi Ann Javier in New York at ljavier@bloomberg.net, Krystal Chia in Singapore at kchia48@bloomberg.net.

To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net, Joe Richter, Steven Frank

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