LME bans Russian-origin metal after UK, US impose new sanctions
The London Metal Exchange (LME) on Saturday banned from its system Russian metal produced on or after April 13 to comply with new US and UK sanctions imposed for Russia’s invasion of Ukraine.
The sanctions aim to restrict revenues for Russia from the export of metal produced by companies such as Rusal and Nornickel that help to fund its military operations in Ukraine.
The US Treasury Department and the British government on Friday prohibited the 147-year old LME and the Chicago Mercantile Exchange (CME) from accepting new Russian production of aluminum, copper and nickel.
If an owner of Russian metal can provide evidence that it was produced before April 13, it can still be put on LME warrant – a title document conferring ownership, the LME said.
“Russian metal warrants issued on or after 13 April 2024 for metal produced before 13 April 2024 are still subject to restrictions that prevent UK LME Members and clients from cancelling or withdrawing the corresponding metal unless they are doing so for the account of a non-UK Client,” the exchange said in a statement.
In response to Reuters question on the sanctions and the share of Russian metal in its warehouses, the CME said: “We are reviewing and will communicate any impact to our markets. We do not disclose the origin or brands of the eligible or registered metal we have in store and that is consistent across all of our physically delivered markets.”
On Friday, a UK official said London expected any market disruption to be short-lived and that the government had consulted with colleagues in the US, the LME, the Bank of England and the Financial Conduct Authority to minimize any impact.
The announcement of the ban was made while trading was closed for the weekend.
One industry source, speaking on condition of anonymity, predicted price reaction would be muted when trading resumes in Asian time on Monday, while another said a repeat of the kind of aluminum price jump spurred by US sanctions on Rusal in April 2018 was possible.
Both said any European Union sanctions would be almost certain to trigger a price surge. The bloc last year imported around 500,000 metric tons of aluminum for use in transport, construction and packaging.
Loopholes?
The action does not block bilateral contracts between two companies, rather than via the LME, British officials said on Friday, speaking on condition of anonymity.
The officials said continued trading of Russian metals off of the exchanges is expected to be at a discount and that it does not restrict supply.
The share of available aluminum stocks of Russian origin in warehouses approved by the LME stood at 91% in March, while the proportion of copper stocks rose to 62% from 52% in February. Russian nickel in LME warehouses amounted to 36% of the total.
The high share of Russian-origin metal in LME inventories has been a concern for some producers, who compete with Russia’s Rusal, and some Western consumers who have avoided Russian metal since Moscow’s invasion of Ukraine in 2022.
Britain banned the import of base metals from Russia in December and said it would extend the prohibition to ancillary services when it could be done in concert with international partners.
The LME, the world’s largest and oldest forum for trading metals, is owned by Hong Kong Exchanges and Clearing.