Commodities Corner: What happens if more buyers refuse metals like aluminum from Russia? The LME doesn’t want to find out

by | Oct 20, 2022 | Stock Market

Speculation that the U.S. is considering a ban on aluminum from Russia contributed to a brief spike in prices for the metal a week ago, but some consumers have already voluntarily chosen to avoid metals from the country. That’s led the London Metal Exchange (LME) to consider options to circumvent trading distortions potentially caused by a buildup of metals from Russia in its warehouses.  

News reports last week said the U.S. was looking into a possible ban, restrictions, an increase in tariffs on aluminum imports from Russia, or sanctioning Russia’s aluminum producer United Co Rusal, in response to the country’s military escalation of its war in Ukraine.  “There’s definitely chatter in the aluminum market, but a lack of clarity only contributes to uncertainty that keeps some buyers on the sidelines,” said Christopher Davis, price reporting director, Americas, at S&P Global Commodity Insights. “Some speculate there could be tariffs implemented,” he said. That would be “less drastic than sanctions or a full ban, which would have a more significant impact.” In early March, aluminum producer Alcoa Corp.
said it would stop buying raw materials from, and selling its products to, Russian businesses in response to the country’s invasion of Ukraine. Some reports last week said Alcoa asked the White House to halt U.S. imports of aluminum from Russia. The LME released a discussion paper on Russia metal on Oct. 6 and said it’s 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.” It listed three options to help deal with growing concerns over the “threat to market orderliness.” “If the underlying physical aluminum market got to the point where the vast majority was not accepting Russian metal, then those tons wouldn’t be r …

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