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For fear of price distortion, due to high customs duties, the London Metal Exchange prohibits the storage of certain Russian metals in its British sheds. The global exchange of these metals is not prohibited. Nickel still escapes sanctions, as Russia seems unavoidable in this market.
The London Metal Exchange (LME) is the main trading platform for metals. This is where sales contracts are made and prices are set. A decision on its part is therefore an important element for the markets.
Russia is a major exporter of metals, and its many mines are the wealth of the country. The European sanctions are intended to press where it hurts, and the metals, like the companies that exploit them, and the oligarchs who own them, are therefore in the sights.
Since March 15, Russian and Belarusian copper, primary aluminum, aluminum alloy and lead have been subject to additional customs duties of 35% in the United Kingdom. A tax that should dissuade the purchase, in short. With this decision, the LME fears that there is a distortion between the trading price of the metal and the real price of the metal, it explains in a press release. To avoid this distortion and its impact on the market, the exchange therefore prohibits storage in its approved warehouses in the United Kingdom (it has two, in Hull and Liverpool).
Concretely, this means that these metals can no longer circulate in the United Kingdom, and British buyers can no longer get their hands on these metals. But the exchange is not prohibited for all that: the LME has a total of 600 approved hangars in the world. Calls are also being heard within the stock exchange to completely ban the exchange of Russian metals, but the institution does not want to go further than the sanctions issued by the United Kingdom government, reports Archyde.com.
Russian and Belarusian metals that left Russia before March 25, however, are not affected by the measure. UK warehouses currently contain none of these metals.
Not all metals are covered, and that’s not an oversight
The targeted metals are not the only ones targeted. Nickel in particular is not targeted, and this is not trivial. Since the start of the war, nickel has escaped any sanctions imposed by the West on Russia. And for a particular reason: the country is the main supplier of this metal, used in particular in the batteries of electric cars. Palladium is also mainly produced in Russia, and also escapes sanctions. The big boss behind these two metals, Vladimir Potanin, a close friend of Putin moreover, is not bothered by sanctions either.
Potanin’s company, Norilsk Nickel (or Nornickel), however, also exports copper. It is therefore directly targeted by this storage ban and these high customs duties. Other targeted companies are still Rusal and Uralelektromed.