Russia will be cut off from the world’s largest metal exchange

Russia will be cut off from the world's largest metal exchange

The London Metal Exchange (LME), which has so far acted strictly within the framework of sanctions, intends to discuss with market participants under what conditions it itself can refuse to trade in Russian metals. Such a move could have serious consequences for aluminum, nickel and copper producers.

According to people familiar with the situation, the LME plans to start consultations that will be the first step towards a possible ban on new deliveries of Russian metals to the exchange’s warehouses. informs Bloomberg. There will be discussion about whether to block such shipments and under what conditions.

The discussion itself does not mean that the LME has made a decision, the agency notes, but so far the management of the exchange has stated that it does not plan any actions that go beyond the sanctions. The latter, in general, did not affect such suppliers as Rusal and Norilsk Nickel.

Before the war, Norilsk Nickel provided 15% of the world production of high-grade nickel. As for aluminum, Rusal supplied 40% of the metal produced to Europe.

But in September, when the season for renegotiating annual contracts began, some European companies unambiguously refused to work with Russian suppliers. Among them are Novelis, a division of India’s Hindalco Industries, and Norway’s Norsk Hydro, which do not intend to buy aluminum. This raises the possibility that Rusal may overstock LME warehouses with its products: Bloomberg last week informedthat the company is developing a plan to supply aluminum directly to the stock exchange’s Asian warehouses. An excess of metal that traders do not take can affect market statistics and quotes.

Shortly after Russia’s invasion of Ukraine, the LME’s “copper committee” (a group of industry representatives acting as advisors) recommended a ban on Russian copper shipments. Specialists in other metals opposed. But lately, the balance of power has begun to shift, and the aluminum committee as a whole has also supported such a move, Bloomberg sources say.

Following the agency’s publication, LME CEO Matthew Chamberlain told the exchange that she was indeed thinking about starting a discussion “to get the views of market participants on the possibility of continuing to accept Russian metals in the physical market.” But the final decision on the start of the discussion has not yet been made, he added.

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