The London Metal Exchange warned of uncertainty due to sanctions.

The London Metal Exchange (LME) announced that its members will be required to comply with new US and UK sanctions , and the exchange is suspending guarantees on restricted metals produced on or after April 13, 2024. However, the LME emphasizes that the restrictions could cause market uncertainty.

"The LME acknowledges that the amended sanctions package may result in some market uncertainty, which could lead to market participants demanding the use of the relevant metal as a safeguard measure. Therefore, it is possible that a relatively large stock of the relevant metal [which would be available to non-UK-based clients] may be required," the exchange said in a statement.

The LME notes that these changes will not prevent the exchange's clients who are not British citizens from continuing their operations. However, British nationals and UK-registered warehouses will be able to continue providing services to non-British clients if the metal was produced before April 13 and the client has the appropriate authorization.

The exchange notes that Russian primary aluminum accounted for over 91% of its warehouse inventory. "This indicates that a significant portion of the market remains willing to accept deliveries of Russian aluminum," the LME concluded.

On April 12, the United States imposed a ban on imports of Russian-produced aluminum, copper, and nickel, and prohibited American companies from providing services related to the acquisition , export , re-export, sale, or supply of these metals. Due to the sanctions, the London Metals Exchange (LME) and the Chicago Mercantile Exchange (CME) will be unable to replenish their aluminum, copper, and nickel reserves with supplies from Russia, according to a statement from the US Treasury Department.

Bloomberg wrote that the new sanctions won't prevent Russia from selling metal, as they don't prevent non-US market participants from buying Russian products. "While the LME plays a key role in setting global prices, the vast majority of metals are bought and sold between miners, traders, and producers, without ever seeing the inside of an LME warehouse," the agency emphasized.

How LME and certified warehouses work

The LME trades aluminum, copper, zinc, nickel, tin, cobalt, molybdenum, lithium, as well as ferrous scrap metal, rebar, and hot-rolled steel. This sets the price of these metals, which is used by buyers and sellers worldwide when signing direct supply contracts. The exchange also serves as a "market of last resort" for metal that has not found a buyer under such contracts.

The LME does not own or operate warehouses; it merely certifies their operators and the warehouses themselves so that they can store metals recognized by the exchange's brands. The 500 warehouses approved by the LME are located in 34 cities across Europe, the US, and Asia.

According to LME data, in March 2024, the share of Russian primary aluminum in its warehouse system was over 91% (approximately 312,000 tonnes). For nickel, this share was 36%, and for copper, 62%. According to Reuters sources , trading of Russian metals will continue on over-the-counter markets, but at discounts.

Russia condemns Western sanctions and considers them illegal. The Kremlin emphasizes that the restrictions harm those who impose them more.