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The London Metals Exchange has given up, for the time being, on banning Russian metals from its system. The LME decided after a consultation of several weeks.
The London Metals Exchange will not be more royalist than the states that have not yet taken any international sanctions against Russian metals. It will therefore not restrict their trade. Russian aluminium, copper and nickel can continue to be traded in this high place for setting world prices for non-ferrous metals. The LME (London Metal Exchange) will also continue to authorize the physical storage of Russian metals in its warehouses, and will not limit the quantities.
Since the invasion of Ukraine, the question has been debated on several occasions, either because bosses of Russian metal-producing companies were under British sanction, or because some feared an impact on prices. At the start of the school year, the American producer Alcoa sent several letters to the famous body, to request an embargo on Russian products, according to information obtained by the Reuters agency.
Alcoa’s fear is that for lack of a buyer, the proportion of Russian aluminum in physical stocks will only increase and that the discount applied to Russian products will lower the price of contracts, and in particular those of aluminum.
The LME does not fear disorder in the markets
After an open consultation during the month of October, the LME finally opted for the the state in which with several arguments: buyers continue to agree to buy Russian metal, the demand therefore exists and it is not up to the LME to impose a moral judgment on the entire market.
To support its refusal to opt for an embargo, the London metal exchange relies on the latest figures from October: no major influx of Russian metal has been observed in its warehouses. And if that were to happen, the institution believes, at this stage, that it would not lead to disorder in the market.
The Stock Exchange, which refers to the world level, however undertakes to be transparent and to publish regularly, from next January, the details of the volumes of Russian metals in storage.
An unsustainable ban?
Banning Russian metals would be difficult, explains a regular LME broker given the weight of the Rusal group. And that would mainly have the effect of opening a boulevard to the increasingly dominant Shanghai metal exchange, which also has physical stocks. Without forgetting that the LME is owned by the Hong Kong stock exchange, and would therefore perhaps find it difficult to oppose Russian interests, underlines our interlocutor.