Russia’s 2022 invasion of Ukraine has generated headaches for the LME warehousing system. The proportion of Russian aluminium stored in LME warehouses has grown significantly since the conflict began.
By the end of 2023 Russian-brand metal was reported
to account for 90% of the exchange's warranted aluminium stocks. In the absence
of blanket sanctions, consumers have taken an approach of ‘self-sanctioning’,
resulting in Russian metal increasingly finding itself in LME warehouses.
Russia will to be able to continue selling its
metal, as the sanctions do not impede non-US entities from buying Russian
material. While the LME holds significant influence in setting global prices,
most physical metal trade occurs directly between miners, traders, and
manufacturers, bypassing LME warehouses entirely.
Since 2022, there has been an
increase in Russian metal sales to China, as Western buyers ‘self-sanction’ seeking
alternate supply sources. Russian metal has risen to account for up to 80-90%
of China’s monthly imports, a significant rise from ~25% pre-invasion.