LME Faces Fresh Crisis After New UK Metal Trading Sanctions

SEATTLE (Scrap Monster): The new UK sanctions on the London Metal Exchange (LME) that prohibit British citizens and companies from trading in several Russian metals, including copper, aluminum and nickel, is seen creating confusion among traders. Also, it has raised fears that the exchange could be left with a glut of Russian aluminum.

Although most large metal traders and banks are headquartered outside the UK, many have a significant presence in the UK or have senior British staff. As per reports, some traders based in Britain are seen delivering the Russian metal held by them onto the LME in a hurry. This could be evident from the LME stock reports to be published in the coming days.

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The sanctions would prevent British entities from taking physical delivery of Russian metals purchased from the exchange after 15^th December. This will significantly reduce the already small pool of buyers for Russian metal on the LME, thus leaving the exchange with rising stocks of unwanted metal.

According to Max Layton, head of commodities research at Citigroup Inc., the sanction may result in significant Russian inflows and weakness on the LME, which in turn may eventually lead to the delisting of Russian metal from the LME.

The present situation is likely to reopen the earlier debate as to whether the LME should ban deliveries of Russian origin metal.