LME considers Russian metal warehousing viability

In an Oct. 6 notice to its member companies, their agents and other interested parties, the London Metal Exchange (LME) says it is in the process of “gather[ing] further data and views” as to whether accept Russian-made aluminum, copper, nickel and other metal in its warehouses next year.

"The LME has been closely monitoring the usage and throughflow of Russian metal on the LME, to ensure that LME warehouses do not see a significant inflow of unwanted Russian stocks, posing a risk of creating a disorderly or unfair market," the organization says. "Through 2022, the LME’s understanding is that consumers have broadly been willing to take deliveries of Russian metal (which is supported by data as to the flow of Russian stocks both into and out of LME warehouses).”

While 2022 has played out that way, the exchange expresses concern about the near-term future, saying, "As the current negotiation period for 2023 supply agreements progresses, the LME understands that an increasing number of consumers may be expressing an unwillingness to accept Russian metal in 2023. As a result, and in light of the potentially changing market landscape, the LME now considers it appropriate to gather further data and views.”

[Editor's note: About one week after the LME announcement, financial news websites began reporting that Switzerland-based Glencore appeared to be responsible for introducing considerable volumes of Russian-made aluminum into LME warehouses.]

The LME notice links to an 11-page document that provides additional background information on the situation and charts and graphs on Russian metal flows since it invaded Ukraine in late February.

The 2022 LME warehouse inflow and outflow statistics seem to show “that metal consumers are currently honoring 2022 supply contracts,” the LME says, adding, “The LME is aware of an increasingly stated concern regarding supply contracts for 2023; namely, that supply contract negotiations which have begun for 2023 are specifying that Russian metal will not be accepted for delivery.”

The LME also presents several potential actions it could take, including maintaining the status quo; introducing volume thresholds on Russian metal accepted in warehouses; and several scenarios involving the suspension of Russian metal inflows.

The group concludes, “The LME is keen to hear views on the topics in this discussion paper,” and urges stakeholders to provide feedback to discussionpaper@lme.com.