UK, US ban trading in Russian aluminium, copper, nickel

UK, US ban trading in Russian aluminium, copper, nickel
The UK and US have banned the trade in Russian aluminium, copper and nickel, which earned Russia $15bn in export revenue last year. / bne IntelliNews
By bne IntelliNews April 15, 2024

The London Metal Exchange (LME) and Chicago Mercantile Exchange (CME) have blocked the trade of aluminium, copper and nickel produced by Russia, the UK government announced late on April 12.

The move will drive Russia deeper into China’s embrace, as Shanghai is now on the only major commodity exchange that is still accepting and trading Russian metals.

To mitigate the risk of market instability, the government said that the new measures would exempt existing stocks of Russian metal on the two exchanges. These stocks can still be traded and withdrawn without restrictions, providing continuity for market participants. The UK ban is not expected to affect prices in the short-term as there are large stocks of Russian metal in the LME warehouses.

This move, part of existing bans, aims to intensify restrictions on prohibited Russian metal exports, thereby curtailing a "crucial source of revenue for the Kremlin,” the UK said.

The key Russian metals of titanium and platinum group metals (PGMs) were excluded from the ban, as Russia remains a major supplier of both of these rare metals.

The LME, in a separate release, affirmed its commitment to aligning with relevant sanctions and tariffs and announced it would collaborate with LME Clear to implement the sanctions for both its operations and those of its market participants.

Guidelines published by the LME outlined the impact of UK legislation and trade licences on Russian metal trading. Specifically, they clarified that under the amended sanctions package the acquisition of Russian warrants issued before April 13, 2024, would be permissible. However, metal produced after this date would be subject to prohibition.

The LME announced an immediate suspension on warranting relevant metal produced on or after April 13, ensuring compliance with the sanctions while facilitating continued participation in the daily settlement process.

The LME also announced a suspension on placing metal produced by specific affected brands on warrant in LME-listed warehouses globally, unless the metal owner could establish with clear documentary evidence that its metal had been produced before April 13.

Metals are Russia’s largest export earner after energy; the trade was worth $15bn in 2023. The value of Russia’s metal exports has declined since the Ukraine invasion two years ago, falling by $10bn in 2023 from $25bn in 2022 due to sanctions.

US Secretary of the Treasury Janet Yellen endorsed the targeted action, stressing its role in reducing Russia's earnings while safeguarding allies from adverse repercussions.

The UK's first announced its intention to ban Russian metals in May 2023, and followed up with legislation introduced in December to directly prohibit Russian metal imports. The US also imposed tariffs on various Russian metal imports.

"This follows a dialogue between the two countries to maximise the impact of the policy, which is a technically complex measure requiring time to work through the details to ensure its effectiveness and minimise the risk of market disruption," the UK government said.

"We have now imposed extensive trade sanctions on Russian-origin oil, gas, gold, diamonds, iron, steel and base metals, dealing a heavy blow to Putin's war economy. But we must continue to work with our allies to further tighten the screws on the Kremlin," said UK Sanctions Minister Anne-Marie Trevelyan.