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Aluminium prices in London reached their highest level in almost two weeks on Wednesday as traders assessed the dangers of a global supply shortage following news of prospective EU sanctions on Russia, one of the world's top producers.
On the London Metal Exchange, three-month aluminium was up 1.4% at $2,258 a metric tonne. On the Shanghai Futures Exchange, the most-traded March aluminium contract closed up 2% at its highest since January 15 of ¥19,025 ($2,653.38) per tonne.
Earlier in the day, LME aluminium reached its highest level since January 8 at $2,262 a tonne.
The metal used in construction, transport and packaging rose after Poland and the Baltic states called for the European Union to ban imports of Russian aluminium and liquefied natural gas over Moscow's invasion of Ukraine.
"If the EU sanctions were applied in isolation, we would view this as primarily an upside risk for regional premia, with limited sustained impact on global market fundamentals and, in turn, LME price," Goldman Sachs analysts said in a note.
"However, if this were followed by similar US sanctions and an LME ban, then a broader ex-China tightening effect would generate significant right tail risk to the LME price," they said.
LME zinc climbed 1.7% to $2,561.50 a ton, copper advanced 1% to $8,492.50, nickel rose 0.3% to $16,360, lead edged 0.4% higher at $2,175 and tin climbed 0.8% to $26,435.
The nearby supply of LME lead is getting tighter, as implied by the discount of the cash contract to the three-month contract shrinking to 88 cents a ton on Tuesday from more than $40 last month.
SHFE zinc jumped 2.3% to 21,250 yuan a ton, nickel increased 1.3% to ¥129,480, copper rose 0.7% to ¥68,380, lead was 0.7% higher at ¥16,665, and tin advanced 1.1% to ¥218,880.
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