Aluminium spirals downward as 'worst time for Rusal has passed'

[SHANGHAI] Aluminium in London dropped for a fifth day, its worst run in almost a year, as concerns eased over supply disruptions after the US softened sanctions against United Co Rusal, the biggest producer outside China.

The metal fell as much as 1.6 per cent to $2,191 a metric ton, and was at US$2,205 at 2.53 pm in Shanghai. Aluminium's two-day loss of 10 per cent through Tuesday was the steepest since 1988, and the market has retraced more than half the gains made since sanctions were announced in early April.

Aluminium's breath-taking rally has been thrown into reverse after the US switched tack, saying on Monday it would provide sanctions relief if Oleg Deripaska relinquishes control of Rusal and extended the deadline for companies to wind down dealings with the producer. That move calmed concerns across the global supply chain. Rusal's shares held their ground in Hong Kong on Wednesday, after surging by the most on record the day before.

"It looks like the incident is moving in the opposite direction to what the market had expected and priced in," Wei Lai, an analyst with Cofco Futures Ltd, said in Shanghai. "So, prices should revert to some extent. The worst time for Rusal has passed." Still, it's unclear how much of Rusal's trade will resume as the flow of aluminium and its raw materials depends on ports, shipping companies, banks and buyers all being comfortable in dealing with the Russian company.

In other metals, nickel gained 0.4 per cent in London, ending a four-day loss. The metal had been caught up in the sanctions row due to fears that the US could target other Russian companies, including MMC Norilsk Nickel PJSC.

Copper fell 0.8 per cent, after rising Tuesday following comments from Freeport-McMoRan Inc that it would be impossible to keep mining its flagship Grasberg mine in Indonesia if it were to adopt new environmental standards demanded by the government.

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