The London Metal Exchange (LME) recently imposed a ban on Russian metals produced after April 13, adhering to new sanctions from the U.S. and UK prompted by Russia’s actions in Ukraine.
These sanctions specifically target companies like Rusal and Nornickel, whose metal exports are believed to fund Russia’s military efforts in the region.
As of April 13, both the U.S. Treasury Department and the British government have forbidden the LME and the Chicago Mercantile Exchange (CME) from accepting new Russian metals such as aluminum, copper, and nickel.
However, the LME clarified that Russian metals produced before this date could still be traded if proven with proper documentation.
They stated, “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.”
In response to inquiries about the implications of these sanctions and the proportion of Russian metals in its stocks, the CME commented, “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.”
British officials anticipate minimal market disruption from these new sanctions, suggesting any disturbances would be temporary.
They have engaged in consultations with U.S. counterparts and regulatory bodies like the Bank of England and the Financial Conduct Authority to mitigate any potential negative effects.
Despite this, industry insiders suggest there could be varied price reactions when markets reopen, with some predicting potential price surges, particularly if the European Union decides to implement similar sanctions.
The newly announced measures also do not interfere with direct bilateral trading of Russian metals, which may continue albeit likely at reduced prices.
This trading is not restricted and does not affect the overall supply chain directly.
The LME, a historic and significant player in the global metal market owned by Hong Kong Exchanges and Clearing, reported significant percentages of Russian aluminum, copper, and nickel in its inventories as of March.
With a large portion of its stocks originating from Russia, there have been growing concerns among some Western consumers and competitors about the dominance of Russian metals in the market since the onset of the conflict in Ukraine.
The UK has already placed bans on the import of Russian base metals since December, planning to extend these restrictions to related services in coordination with international partners.