The US and UK governments will begin restricting the trading of new Russia-origin aluminium, copper and nickel on global metal exchanges and in over-the-counter derivatives effective Saturday April 13 in a bid to block profits to the Kremlin.
As a result, metal exchanges including the London Metal Exchange and Chicago Mercantile Exchange will be prohibited from accepting new aluminium, copper and nickel produced by Russia, according to statements released by the US and UK governments on Friday April 12.
The US Department of the Treasury added in its statement that it also will prohibit imports of these materials.
To minimize the risk to market stability, the US and UK measures will exempt the existing stock of Russian metal on these exchanges, so it can still be traded and withdrawn, according to the UK government release.
LME chief executive officer Matthew Chamberlain said in a statement on Friday that the exchange would publish guidance no later than 11am London time on Sunday April 14 to outline the LME’s understanding of the UK legislation and how it would affect the position of Russian metal, so that the market can review it in time for market open at 1am on Monday April 15.
“The LME reflects all relevant sanctions and tariffs in its operations, and so will take steps — in collaboration with LME Clear — to implement these sanctions for its own operations and the operation of its market,” Chamberlain said.
CME officials did not immediately respond to requests for comment.
Targeted prohibitions
“Our new prohibitions on key metals, in coordination with our partners in the United Kingdom, will continue to target the revenue Russia can earn to continue its brutal war against Ukraine,” US Treasury Secretary Janet L Yellen said in the US and UK statements. “By taking this action in a targeted and responsible manner, we will reduce Russia’s earnings while protecting our partners and allies from unwanted spillover effects.”
UK Chancellor of the Exchequer Jeremy Hunt added: “Disabling [Vladimir] Putin’s capacity to wage his illegal war in Ukraine is better achieved when we act alongside our allies. Thanks to Britain’s leadership in this area, our decisive action with the US to jointly ban Russian metals from the two largest exchanges will prevent the Kremlin from funneling more cash into its war machine.”
Said a US aluminium trader: “It’s about time, and the metal that’s in the warehouse will just sit there because no one‘s going to want to use it, as they won’t be able to redeliver it.”
The announcement is a “game changer,” according to Fastmarkets analyst Andy Farida.
“One has to wonder if these metals will find a new home in China,” he said. “Could we see ballooning in[Shanghai Futures Exchange] warehouse stocks? …To properly stop Russian revenue, Chinese goods made from Russian raw materials need to be banned, but that is simply impossible and likely would lead to geopolitical and economic fallout like we have never seen before.”
Total open-tonnage stocks in LME warehouses on March 28, according to the latest data released by the exchange on April 10, were as follows:
- Primary aluminium totaled 342,225 tonnes, of which 311,900 tonnes (91.14%) were Russian
- Copper totaled 97,775 tonnes, of which 60,750 tonnes (62.13%) were Russian
- Nickel totaled 68,816 tonnes, of which 24,858 tonnes (36.12%) were Russian.
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