Posted on 04 Apr 2022
The London Metals Exchange has suspended the placement of Russian-branded base metals in its UK warehouses due to the UK government's 35% additional duties on Russian base metal imports, it said in an April 1 member notice.
The UK announced on March 15 a 35% extra duty on a number of Russian and Belarussian imports, including copper, lead, primary aluminum and aluminum alloy, which took effect on March 25.
Other metals affected are iron, steel, silver and iron ore, although these are not kept in LME warehouses.
The LME said that these Russian base metals could not be put in its warehouses unless it could be proved that the exportation date from Russia was before March 25.
The list of brands affected by the regulation include copper from Norilsk Nickel and Uralelektromed, primary aluminum from Rusal smelters and Boguchany Aluminium Smelter, aluminum alloy from SEAL & Co., Permtsvetmet and Rusal, and lead from Fregat.
There were currently none of these metals from Russia in LME-listed warehouses in the UK, it said, meaning that existing stocks of copper, lead, primary aluminum and aluminum alloy on warrant would not be impacted, and no products from Belarus were listed.
The suspensions were necessary "in order to minimize the risk of any such price dislocation, and in turn any possible market disruption and disorderly market conditions as a consequence of the regulations," The LME said.
"The LME is concerned that any metal which is subject to the regulations and which is put on warrant in LME-listed warehouses in the UK will be unable to be removed from warrant and imported into the UK without significant additional cost as a result of the regulations," the LME said.
It added that the cost of shipping the metal elsewhere could also be prohibitive, which could both lead to a risk of there being a dislocation between the price of the traded metal and the price of the underlying physical metal.
The LME will revisit the requirements if the regulations are amended or removed, it said.
The exchange previously told S&P Global Commodity Insights that it was closely monitoring developments in respect to Russian sanctions and did not plan to take independent action outside the scope of sanctions.
If it placed restrictions on the circulation of metal produced in Russia within the LME system, this would not be limited solely to the LME's business, but would also affect all those participating in the global market and "would, in effect, be an action taken on behalf of the LME's global user base," the LME said at the time.
"Our priority is to maintain an orderly market for the benefit of all market participants and we will, therefore, keep this decision under constant review and ensure we maintain a dialogue with governments as the situation evolves," the LME said.
The exchange has had a daily trading limit of 15% on all base metal trading since March 15 due to volatility stemming from the Ukraine conflict.
Source:Platts
