The London Metal Exchange's (LME) plans to limit the entry of Russian-origin metal into its warehouses could be a turning point for aluminum prices in China, combined with Beijing's support for the domestic producer and production cuts, according to new Platts analytics.
Aluminum prices in China are expected to remain volatile for the foreseeable future before the LME makes a final decision to suspend trading and storage of Russian metals.
According to the Shanghai Futures Exchange (SHFE), the most active SHFE aluminum futures contract for November delivery closed on October 10 at CNY 18,565 ($2,599) per tonne, up 1.6% from settlement holiday prices. The increase was mainly due to the increase seen on the LME.
On October 6, the LME published a discussion paper on the possibility of a ban on the trading and storage of Russian aluminum, nickel and copper through the exchange amid fears that market participants are increasingly withdrawing products, while negotiations on the contract for 2023 continue.
p>Meanwhile, production cuts continue in Europe and China.
Thanks to production cuts and the LME's plans, LME aluminum prices rose during the China Day holiday as oversupply in LME warehouses is cleared once the exchange restricts new supplies of Russian aluminum.
The LME's three-month official supply of aluminum rose to $2,345.5/t on October 7, up 6.8% from September 30.
Earlier, markets were concerned that Russian metal producers, including Rusal, would not be able to sell aluminum and would be able to ship the metal to registered LME warehouses, which could lead to an increase in stocks in LME warehouses and put pressure on prices.
Russia is the main producer of primary aluminum in the world, while RUSAL accounts for about 6% of world production.
Sources said that China's imports from Russia are not expected to rise significantly in the coming months as domestic capacity grows.
Primary aluminum imports to China from Russia increased by 7.5% in August compared to the previous month to 41,978 tons, accounting for 85% of the country's total imports.
Meanwhile, Sichuan smelters are resuming production, but progress remains slow due to new cases of COVID-19 and repairs to electrolysis tanks.
