Metal Markets Regain Equilibrium as Aluminum Supply Worries Ease

(Bloomberg) -- After three weeks of intense volatility, metal markets seem to be calming down.

Aluminum steadied after a four-day sell-off that accelerated after the U.S. decision to ease sanctions against United Co. Rusal. Nickel advanced as the Philippines moved forward with a plan to limit the area of land miners are permitted to exploit. Copper ended the session down 0.1 percent.

Aluminum’s rally has been thrown into reverse after a change in tack by the U.S., which said Monday that it would provide sanctions relief if Oleg Deripaska relinquishes control of Rusal and extended the window for traders to stop dealings with the company. Glencore Plc, the largest buyer of aluminum from Rusal, is restarting purchases from the Russian company, according to people familiar with the matter.

“Prices should revert to some extent,” Wei Lai, an analyst with Cofco Futures Ltd., said in Shanghai. “The worst time for Rusal has passed.”

Aluminum Update: Consumers Are Buying Pre-Sanctions Rusal Metal

Still, it’s unclear how much of Rusal’s trade will resume as the flow of aluminum and its raw materials depends on ports, shipping companies, banks and buyers all being comfortable in dealing with the Russian company.

UBS Group AG said the market is underestimating supply challenges. The bank forecast prices of $2,500 a ton in six months and $2,300 a ton in 12 months.

Aluminum rose 0.8 percent to settle at $2,245 a metric ton at 5:52 p.m. on the London Metal Exchange. Prices have given back roughly half the gains since sanctions were announced in early April.

In other metals, zinc was the biggest loser in London. Lead also fell, and tin rose.

Orders to withdraw zinc from warehouses tracked by the LME fell 12 percent to the lowest since 2012. So-called canceled warrants for copper were on the rise, notching the biggest four-day increase since 2010.

©2018 Bloomberg L.P.

With assistance from Winnie Zhu, Thomas Biesheuvel

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