Metals whipsawed as sanctions on new Russian supplies rattle LME

Metals swung sharply, with aluminium surging by a record before later erasing most of its gains, as traders digest US and UK sanctions that banned delivery of new Russian supplies onto the London Metal Exchange.

The curbs on aluminium, nickel and copper announced late on Friday don’t prevent Russia from selling its metals to buyers outside the US or UK, and don’t restrict the vast majority of the global trade in metals — which takes place directly between miners, traders and manufacturers rather than through the exchange.

But the sanctions will still reverberate through metals markets because of the LME’s central position at the heart of the industry. Its prices are used as a benchmark and referenced in a huge number of contracts around the world, and many buyers view the ability to deliver on the LME as essential.

ALUMINIUM UP

“While the new restrictions do not stop the trade of Russian metal, we could see some temporary upside support for prices of copper, aluminium and nickel,” Amy Gower, metals strategist at Morgan Stanley, said in an emailed note. That will be particularly true “if the ban on delivery into LME and CME warehouses makes traders and users less willing to handle Russian material and disrupts broader trade flows.” Aluminium jumped as much as 9.4 per cent as the market opened, the most since the current form of the contract was launched in 1987, while nickel rose as much as 8.8 per cent. However, both metals were only up by around 2 per cent as trading got under way in Europe, and copper was little changed. On the Shanghai Futures Exchange — where some brands of Russian metal can still be delivered — aluminium closed marginally lower, while nickel was up 0.7 per cent.

Russia is an important metals producer, accounting for 6 per cent of global nickel supply, 5 per cent of aluminum and 4 per cent of copper. The restrictions bar new Russian supplies of all three metals to the LME as well as to the Chicago Mercantile Exchange, while allowing delivery of metal produced prior to April 13.