Aluminum hovered near the strongest level since 2008 as traders assessed the impact of an easing of geopolitical tensions over Ukraine and the persistent pressure of soaring energy costs on global supplies.
Russian President Vladimir Putin said he hopes for a diplomatic solution to tensions with the U.S. and its allies, and announced a partial pullback of thousands of troops near the Ukrainian border. The news re-ignited risk appetite across markets and eased concerns over possible disruptions to supplies from Russia in the event of military action or sanctions.
Aluminum has led gains in base metals this year with an advance of 14%, as rising fuel costs and environmental curbs snarl supply in Europe and China. The spot premium on the London Metal Exchange reached the widest since 2018 this week, signaling a lack of immediate supply, before retreating on Tuesday.
In China, the biggest producer and consumer of aluminum, prices are supported by tight supply because of pandemic-driven lockdowns and constraints during the Beijing Winter Olympics, Jinrui Futures Co. wrote in a note.
Separately, China’s inflation slowed in January, giving the central bank more room to ease before a key political leadership meeting later this year. The outlook for a further relaxation of monetary policy is supportive for metals.
Aluminum for three-month delivery on the LME fluctuated between gains and losses, and was flat at $3 208 a ton by 10:40 a.m. in Shanghai. The metal reached $3 333 in intraday trading last week, the highest price since a record of $3 380.15 was touched in 2008. Other metals were mixed.