Large amounts of unsold Russian metal could hit the market of last resort
More than 60% of the copper stored in London Metal Exchange warehouses at the end of September was produced in Russia.
Large amounts of unsold Russian metal, particularly aluminum, could hit the market of last resort and the LME is sufficiently concerned that it has issued a discussion paper on whether to suspend all deliveries.The proportion of Russian copper in LME stocks was actually higher in the third quarter of 2021, when it reached 95% of live tonnage, LME data shows.
Until last month Russian copper had escaped the official sanctions net, meaning users could legally continue accepting it against contracts for “LME deliverable” metal. True, power rationing has constrained China’s output in the last couple of years and the country imported significant amounts of primary aluminum in 2020 and 2021.
Rusal has just announced a sales management reshuffle and says its order book is “solid and the company has no need to deliver metal to LME warehouses.”Rusal, which has emerged as a major supplier of “green” aluminum, cautions that suspending its brands in the current low-stocks environment would create increased price and physical premium volatility.
But then so too would suspending Russian metal ahead of official sanctions, which is the dilemma now facing the LME.
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