New sanctions on Russian aluminum, copper, and nickel will make life more difficult for metals traders at the LME and CME, but China will probably benefit most.
The United States and Great Britain tried again to weave between sanctions that hurt Russia without damaging the rest of the global economy. On April 12, the governments of the two countries cut their metals exchanges from engaging in new transactions involving Russian aluminum, copper, and nickel. The exchanges include the London Metal Exchange (LME) and Chicago Mercantile Exchange (CME), among other metal exchanges.
At the same time, the two governments did not completely cut off the purchase of these metals from Russian sources – they can still occur elsewhere. For example, the Shanghai Futures Exchange (SHFE) is not covered as it is regulated by China. The country has been increasing Russian metals imports since 2022 and will now be the major exchange for such metals.
Dating is important
In order to ease the shock of the sanctions, they apply only to Russian aluminum, copper and nickel made on or after April 13, 2024. Any product from Russia that is already in the pipeline and has the proper documentation to prove that it was created before the 13th is still legal to trade on the U.S. and UK exchanges.
The gradual withdrawal of Russian metals is important for those in the trade, as such metals comprise an important part of their volume. Reuters notes that London is particularly sensitive to this, as Russian made stocks currently comprise 40% of its available metal stocks. In particular, aluminum from there comprised 91% of its available stock on the LME; copper, 62%, and nickel equaled 36% of the total available.
Supply already drying up
The trading sanctions are not the first sanctions against Russian metals by the U.S. and UK. London had already banned the import of new aluminum, copper, and nickel from Russian sources in 2023 in response to Russian thefts of Ukrainian grain. The U.S. had not forbidden imports outright, but in 2023 placed very high tariffs on these and other items.
The EU’s aluminum association, European Aluminium, called for meaningful sanctions against Russian aluminum imports in November 2023, as sanctions at that time had covered only 12% of imports from Russia. However, Reuters notes on April 12, 2024, that the association had been calling for general sanctions against Russian aluminum, and not to name Rusal in particular.
