The ban on new metal deliveries to the London Metal Exchange (LME) is anticipated to prompt a decline in aluminium stocks in LME-approved warehouses, potentially leading to higher LME prices. The ban, imposed by the U.S. and Britain, aims to curtail Russian government export revenues and restrict the delivery of Russian metal produced after April 13. Market participants expect this to tighten supplies and contribute to increased prices.
Russian metal constituted a significant portion of aluminium inventories in LME warehouses, and the ban is expected to affect the availability of Russian units on the exchange. This development is likely to have a positive effect on LME prices as aluminium leaves warehouses and is not replaced with excess Russian metal. Concerns about future LME supplies are reflected in the narrowing discount between cash and three-month contract prices, indicating potential implications for pricing dynamics.
While the ban is projected to bolster LME prices, it may result in heightened shipments of primary aluminium from Russia to China, potentially increasing supplies in China and impacting aluminium prices on the Shanghai Futures Exchange. The ban’s implications are expected to influence trading dynamics and pricing for Russian commodities, with potential ramifications for global aluminium markets.