London Metal Exchange rejects calls to ban Russian metal

The London Metal Exchange has backed away from imposing a ban on Russian metals in a decision that will disappoint producers, traders and consumers who have argued a flood of Russian material in their stockpiles could lead to a disorderly market.

The world’s largest marketplace for commodities such as aluminum and copper said Friday that trading in Russian supplies would remain allowed as a sufficient number of consumers intend to continue embracing the metal.

The exchange, which has endured a tough year following March’s nickel market chaos, made the decision after releasing a consultation paper that members had until October 28 to respond to.

While Western governments have imposed sanctions on Russian crude oil and coal, no equivalent restrictions have been imposed on Russian metals. Instead, some consumers are “sanctioning” themselves and refusing to buy Russian material.

“While there is obviously an ethical dimension to the global acceptance of Russian metal, we believe the LME should not attempt to make or impose moral judgments on the broader market,” the exchange said specified.

The responses indicated “much of the market is still planning to accept Russian metal in 2023,” the LME said. However, it reserves future restrictions if the market becomes disordered.

The LME is crucial in setting global benchmark prices for metals. An LME ban on Russian material would have had far-reaching implications, as the ability to have metal shipped to its warehouses is usually a condition for banks to extend funding to producers and traders.

Traders and producers had warned that widespread “self-sanctioning” by Russian metal could result in large volumes of unwanted Russian metal pouring into LME warehouses, leading to price benchmarks that no longer reflect global metal prices.

Russia is a major producer of nickel, copper and aluminum.

Alcoa, a major US aluminum producer, had asked the LME to ban Russian producers including rival Rusal. In a letter to LME chief executive Matthew Chamberlain, presented to the Financial Times, she expressed “serious concern” about the distortion of prices in the aluminum market.

The LME is already under pressure after it froze and canceled billions of dollars worth of transactions in March after nickel surged 250 percent in days, prompting lawsuits from hedge fund Elliott Management and market maker Jane Street.

The LME would have struggled to justify governments stepping in to ban Russian metals, industry leaders say, but by holding a consultation on the market impact, the LME can more easily defend itself in the event of further market chaos. London Metal Exchange rejects calls to ban Russian metal

Adam Bradshaw

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