By Joe Wallace
New sanctions on Russian metals sent global prices for copper, aluminum and nickel higher on Monday.
The U.S. and U.K. last week further restricted trading of Russian metals, in an attempt to reduce the revenue Moscow receives from commodity exports. Under the new sanctions, no newly produced Russian copper, aluminum or nickel can trade on the London Metal Exchange or Chicago Mercantile Exchange. Metal produced before Saturday can still change hands.
Eager to avoid a repeat of the surge in nickel prices sparked by the outbreak of war in 2022, officials at the London Metal Exchange worked through the weekend to try to ensure there were no disorderly moves when markets opened on Monday.
Those efforts appeared to pay off. After spiking as much as 10% in early trading, aluminum contracts in London slipped back. They traded about 2.6% higher than Friday's closing level, at just over $2,500 a metric ton. Copper rose 0.7% to just under $9,500 a metric ton and nickel contracts rose 2.3% to about $18,000 a metric ton.
Shares of Rusal, the giant aluminum producer part-owned by Oleg Deripaska, fell 3.3% in Hong Kong. A company spokesperson said the sanctions wouldn't affect its ability to supply aluminum.
Russia is one of the world's biggest metal producers, accounting for 6% of aluminum, 4% of copper and 3% of nickel supply. In the case of highly refined nickel traded on the LME, Russia produces 11% of the world's supply, according to Citigroup analysts.
The measures target the trading of Russian materials on exchanges, instead of the broader physical metals market, which could mitigate the effect on overall prices. The Citigroup analysts said Western governments seem to be aiming to drive the price of Russian metals to steeper discounts versus global benchmarks, rather than trying to disrupt actual supplies.
One risk for the LME is that its warehouses, which operate as a market of last resort, could be inundated with Russian metal produced before the cut-off date. It is mostly legal to buy and sell such material, but Western companies may be reluctant nonetheless. An influx of Russian metal into LME sheds would weigh on prices of contracts that miners, traders and buyers such as automakers use as benchmarks when striking deals.
Even so, a tweak to existing restrictions allowing U.K. companies to withdraw Russian metal logged in LME warehouses before Saturday could limit any buildup.
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(END) Dow Jones Newswires
April 15, 2024 05:26 ET (09:26 GMT)
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