Alcoa sees bullish momentum with 3% jump following Russian metal sanctions

On April 15, the stock price of aluminium giant Alcoa soared by over 3 per cent, buoyed by a surge in aluminium prices. The uptick followed a joint announcement from the US and UK regarding fresh sanctions targeting Russian metals to keep Moscow under pressure for the Ukraine-Russia geopolitical crisis.

On April 12, 2024, the UK government stated in a press release, "The London Metal Exchange (LME) and the Chicago Mercantile Exchange (CME) will no longer trade new aluminium, copper and nickel produced by Russia."

In a Monday memo, Goldman Sachs' commodities research team highlighted distinctions from the 2018 sanctions, which focused on individual companies.

Goldman emphasised a crucial aspect of the regulations, "Any Russian metal produced on or after April 13 cannot be delivered (warranted) into Western metals exchanges such as LME and CME."

The group advised investors to maintain their positions in copper and aluminium, asserting that although government interventions won't cause an immediate shift in supply and demand, they are occurring at a time when the fundamentals of copper and aluminium are transitioning towards a sustained tightening trend. This follows two years of relatively stable fundamentals in 2022 and 2023.

Goldman predicts that a reflationary phase in industrial metals will be influenced by three key factors: sustained demand from China for metals used in solar and other environmentally friendly products, tighter controls on China's domestic metal supply, and a cyclical resurgence in manufacturing across Western countries, leading to heightened competition for metals.