Following a member notice posted on the LME’s official website, which stated that the LME had noted media speculation about issuing a consultation on a continuing guarantee for Russian-origin metals, the LME confirmed that issuing a market-wide discussion paper is an option that is currently under active consideration. While the LME is considering a potential discussion paper, it has not yet decided whether to issue such a paper. If a discussion paper is issued in due course, any further steps the LME may take in the future will also take interviewee feedback into account.
In response to the LME’s initiative, some industry insiders said, “Europe has not even gotten around to natural gas, and now it is tossing non-ferrous metals, the consequences of which are unimaginable, and once the LME formally finalizes the decision, non-ferrous metal prices may fluctuate dramatically.”
According to the reporter’s understanding, in fact, as early as 2018 the LME had refused to accept aluminum products from the country Russia. on April 6, 2018, the United States, on the grounds of Russia’s alleged interference in the U.S. election, sanctioned a group of Russian oligarch businessmen, including businessman Deripaska and the three enterprises under his control – involving the Russian aluminum company ( Rusal), restricting trade in Russian aluminum. On April 10 of the same year, the LME suspended deliveries of Rusal-branded aluminum ingots.
After the incident, LME aluminum prices rose continuously, from a low of $1,977 per ton to $2,718 per ton on April 19, or 37.48%, before LSE aluminum dived and eventually returned to fundamentals as the U.S. softened its sanctions against Russia, which were eventually officially lifted in January 2019.
In addition to aluminum metal, followed by nickel. “History also behaves in strikingly similar ways. Among each of the sanctions, the magnitude and persistence of aluminum’s performance is higher than that of other metals. The main reason is that, for aluminum, China can be self-sufficient while exporting nearly 5 million tons, no need to import from Russia, so the Russian aluminum was sanctioned to impact the foreign market a little more. In contrast, the nickel price performance is relatively mild, because for nickel, China almost all imports, so, whether sanctions or not, a large amount of Russian nickel production capacity can be exported to China, just a little more impact on the internal and external price difference, which led to the expansion of import losses, but time can be repaired.”
In February 2022, after the outbreak of the Russia-Ukraine conflict, concerns about the global circulation of Russian nickel triggered a forced market in March, pushing the price of nickel to a record high, the foreign market once from near $ 20,000 / ton, rushed to a high of $ 100,000 / ton. on March 7, a single-day increase of 72.67% in the LSE nickel, followed by the cancellation of billions of dollars of nickel transactions in the LME, in response, there are hedge funds as well as Traders launched a claim action against the LME.
Russia is a major producer of nickel, copper and aluminum, and its every move will certainly change the international trend of non-ferrous and base metals. Goldman Sachs said that if the LME were to stop trading in Russian metals, the ability of Western consumers to buy Russian metals would be severely damaged, but not completely blocked.
Some industry insiders said the LME had previously said it would not act on Russian metals outside the scope of sanctions, while European and American sanctions against Russia by and large did not affect Rusal, Norilsk Nickel (Nornickel) and other large Russian metal companies. However, as seen from the recent release of information, the LME’s latest move seems to reflect a shift in the metal industry’s attitude toward Russian supply. In recent years, along with the continuous reduction of domestic and international inventories of base metal varieties, compared with the international trade volume priced by the LME market, the current LME inventories have become difficult to play the “ballast” function of regulating the short-term market supply and demand balance, which is also the cause of the extreme short-term price fluctuations of LME aluminum, nickel, zinc and other varieties in 2022. This is an important factor in the extreme short-term price fluctuations of aluminum, nickel and zinc on the LME in 2022.
On the industrial side, zinc ingot and copper cathode inventories fell to record low levels, and zinc ingot inventories were below the level of last year’s storage period. As of September 29, LME zinc inventories stood at 53,900 tons, a significant decrease of 27,100 tons from 81,100 tons at the end of June; domestic zinc ingot SMM stood at 81,800 tons as of 26, a decrease of 100,000 tons from 181,700 tons at the end of June.
It is expected that the price trend of non-ferrous metals in the fourth quarter will be further pressured, but the strength of some varieties may be different, copper and zinc due to the pricing of the mine end, the current profit is thicker, the cost support is weaker, low inventory is more reflected in the monthly difference and spot lift, so the absolute price still has the possibility of downward pressure by macro sentiment, electrolytic aluminum, due to strong energy properties, the performance will be firm, non-ferrous metals Internal become more with the species, or show a shock finishing trend.
Aluminum prices in the fourth quarter will be stronger than copper and zinc, the main logic still lies in the energy tension caused by high costs in the aluminum above more easily reflected, relatively speaking, copper recently there is a wave of tired library is expected, while smelting processing fees rebound, there is support for smelters to enhance the possibility of start-up rate, supply tension is less than aluminum. And zinc production reduction pressure is from Europe, so there is also a certain strong support, longer-term cycle to see the European production cuts to expand the zinc ore there is an expectation of easing, but also will not be excess, so in the oscillation of the strong.
Post time: Oct-11-2022