London Metal Exchange aluminium prices surged Tuesday to levels last seen in late January, driven by escalating tensions in Guinea, with traders expecting further upside as political uncertainty there continues.
Three-month aluminium rose to a PM kerb of $2,820 a metric ton, up nearly 4% from Monday to prices last seen Jan. 25.
Martial law in Guinea and the bullish tone across the whole base metals complex helped boost aluminium prices, which are likely to rise further in the near term, said an LME trader.
Guinea is a leading producer of bauxite, which is an essential component used to produce aluminium.
Tuesday, Guinean President Lansana Conte instituted martial law until Feb. 23 after days of deadly protests. The protests were triggered over the weekend following Conte’s appointment of a close ally from his Cabinet as prime minister, a move the opposition said sidestepped a power-sharing agreement.
Many major companies have been affected by the violence, with Alcoa Inc. saying Tuesday that its production of bauxite at its CBG operations had been halted and Rusal saying production had been cut at its Friguia alumina refinery. Rio Tinto PLC said it has evacuated 16 of its staff from the country.
In addition, market speculation of a possible takeover of U.S. aluminium giant Alcoa by Rio Tinto or BHP Billiton was another supportive factor for prices, the LME trader said.
However, strength extended across the entire base metals complex. Copper prices climbed roughly 4% to a PM kerb of $5,749/ton triggered by a decrease in LME copper stocks by 2,800 tons to 213,250 tons.
Michael Widmer of Calyon also pointed to bullish macroeconomic data out of Germany as adding to base metal price support, particularly for copper.
The German Center for European Economic Research’s business expectations index rose for the third straight month to +2.9 points in February from -3.6 points in January, signaling a pickup in economic activity in around 6 months time.
Three-month nickel prices jumped roughly 3% to a PM kerb of $36,000/ton “buoyed by gains reflected across the rest of the complex,” Barclays Capital said.
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