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LME Prohibits Russian-Origin Metal Following US, UK Sanctions

London Metal Exchange Implements Ban on Russian-Origin Metal Post-Sanctions

by Ikeoluwa Ogungbangbe

The London Metal Exchange (LME) announced a ban on Russian metal produced on or after April 13 in compliance with new US and UK sanctions imposed due to Russia’s invasion of Ukraine. These sanctions target companies like Rusal and Nornickel, restricting revenues that Russia gains from exporting metal and supporting its military operations in Ukraine.

The US Treasury Department and the British government prohibited the LME and the Chicago Mercantile Exchange (CME) from accepting new Russian production of aluminum, copper, and nickel. However, if owners of Russian metal can provide evidence that it was produced before April 13, it can still be put on LME warrant.

In response to inquiries regarding the sanctions and the share of Russian metal in its warehouses, the CME stated it was reviewing the situation and would communicate any impact on its markets. A UK official expressed expectation that any market disruption would be short-lived, emphasizing consultations with US counterparts and financial authorities to mitigate potential impacts.

The announcement of the ban coincided with the closure of trading for the weekend. Industry sources anticipate a relatively muted price reaction when trading resumes in Asian markets on Monday, with potential for significant price fluctuations if the European Union imposes sanctions.

Despite the ban, bilateral contracts between companies outside of the LME are still permitted, although trading is expected to occur at a discount and does not restrict supply. In March, Russian-origin metal constituted 91% of available aluminum stocks in LME-approved warehouses, while copper stocks rose to 62%. Russian nickel accounted for 36% of total nickel stocks in LME warehouses.

The dominance of Russian-origin metal in LME inventories has raised concerns among producers competing with Russian companies and Western consumers avoiding Russian metal since the Ukraine invasion. In December, Britain prohibited the import of base metals from Russia and plans to extend the prohibition to ancillary services in coordination with international partners. Owned by Hong Kong Exchanges and Clearing, the LME is the world’s largest and oldest platform for trading metals.

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