Western countries, led by the United States, imposed a series of sanctions on Russia after the conflict broke out, but so far have not imposed any restrictions on Russian metals.
Still, the chilling effect of western sanctions hangs over markets. Some consumers have been refusing to accept Russian copper, which is being shipped to LME warehouses, according to industry sources. For many producers and consumers, Russian copper is often the last resort.
While not all consumers are, many are reluctant to accept Russian copper, some from their own customers who explicitly demand it not be included in their products, according to people familiar with the matter.
Russia produced 920,000 tonnes of refined copper last year, about 3.5 per cent of the global total, according to the US Geological Survey.
LME data show copper inventories on the exchange have risen more than 40 per cent since September 15 to 145,500 tonnes, with warehouses in Rotterdam up 225 per cent, Hamburg up 153 per cent and Kaohsiung up 26 per cent to 14,800 tonnes, 24,800 tonnes and 22,800 tonnes respectively.
The LME's copper inventories are low compared with this year's global total of 25m tonnes of refined copper, but people familiar with the situation warned that the exchange's operations could be problematic if the trend of rising LME copper inventories continued and most of the copper in its warehouses came from Russia.
The West is considering sanctions against Russian metals
The LME, the world's largest and oldest exchange for industrial metals, last week published a discussion paper on whether to ban the trading and storage of Russian metals, mainly aluminium, nickel and copper, in its system.
In the case of copper, the LME's share of Russian copper has been high, exceeding 80% in both May and August this year and reaching an all-time high of 95% in the third quarter of 2021, the LME said in its filing. The LME's all-time high for Rusal was 74 per cent at the end of 2014, while the LME's all-time high for nickel was 65 per cent at the beginning of 2013.
In addition, media reports on Wednesday said the Biden administration was considering a total ban on Russian aluminum imports as a response to the recent escalation between Russia and Ukraine.
The White House is said to be considering three options: an outright ban on Russian aluminium, an increase in tariffs to punitive levels or sanctions against Rusal.
Russia is the world's second largest producer of aluminium, accounting for about 6% of global output, while Rusal is Russia's only primary aluminium producer, producing 3.76 million tonnes in 2021.
