Global Metals Markets Face Uncertainty As Russian Ban Takes Effect
Authored by Metal Miner’s Stuart Barnes via OilPrice.com,
-
The ban could lead to a split between the LME and CME markets, with the CME at a premium and the LME at a discount.
-
Traders are buying up Russian warrants and taking them off the market, making the metal ineligible for Western consumers.
-
China is likely buying large volumes of Russian aluminum at a sharp discount to the LME price.
By now, anyone in the metals market will know that the U.S. and UK recently banned the consumption of Russian aluminum, copper, and nickel produced from April 13 onward. While metal already on the London Metal Exchange (LME) and the Chicago Mercantile Exchange (CME) are still available for consumption, no metal delivered after this date is acceptable. This holds true whether buyers purchase the metal directly or have it physically delivered to the exchange to settle a contract.
The Metals Market Continues to React to the Russian Ban
Russia produces about 6% of global nickel, 5% of aluminum, and 4% of copper. That said, the biggest impact is arguably for nickel. This is because Russia is the world’s second-largest refined class 1 nickel producer after China, and class 1 nickel is currently the only type deliverable on the LME. Russian Aluminum also dominates the LME’s warehouse system, making up some 90% of available metal. Indeed, many in the metals industry consider Russia’s position to be a fundamental weakness that the LME has been unable to redress.
Consumers, on the other hand, seem more concerned about what comes next for the metals market. Does banning Russian metals, which average about half of the LME’s inventory but almost none of the CME’s, mean that the two markets will split? Will an arbitrage open up with the CME at a premium and the LME at a discount, thus reflecting the less accessible nature of such a significant portion of the LME’s inventory?
So far, there is no evidence of this. Still, we are only a week into the new regime. Over the last six months, there has been a mass removal of non-Russian aluminum brands from the LME.
Traders Shift Focus to Russian Warrants Amid Ban Fallout
For some time, Indian metal comprised some 50% of inventory levels, but it was diligently sought out and removed by traders. After the Russian ban, those same traders switched to a wholly different game: buying up Russian warrants, taking them off the market, and then delivering them back.
This makes the metal ineligible for Western consumers, and the buyers receive kickbacks on the warehouse rent in the expectation that the metal will sit there indefinitely. That is, the metal will remain there until someone finds a way to economically get it to a market that is not participating in the ban, such as China or India.
China Remains a Massive Consumer of Russian Metal
Other metals market insiders continue to speculate on other issues. Specifically, they want to know whether the predominance of Russian metal in Europe and Asia will depress the physical delivery premiums in those locations or inflate the U.S. Mid-West delivery premium to reflect the greater desirability of the CME’s inventory.
There is already a stark divergence in premiums, with Europe at twice the level and the U.S. at some three times the level of Japan’s Asian Main Japanese Port price. This reflects the overall tightness of the regions relative to one another.
While Japan does not import Russian aluminum, consumption by its neighbors still depresses the regional price. For instance, China is almost certainly buying the large volumes of Russian aluminum it consumes at a sharp discount to the LME, much as the region buys Russian oil at a sharp discount to global oil prices.
For the time being, Russian metal will likely suffer a discount from the LME/CME price for physical trades. Apart from the unwarranted/re-warrant game underway this month, only those countries not recognizing the U.S./UK ban will accept Russian metal. And, let’s face it, currently applies to most of the world.
Tyler Durden Mon, 04/29/2024 – 14:05
Source: https://freedombunker.com/2024/04/29/global-metals-markets-face-uncertainty-as-russian-ban-takes-effect/
Anyone can join.
Anyone can contribute.
Anyone can become informed about their world.
"United We Stand" Click Here To Create Your Personal Citizen Journalist Account Today, Be Sure To Invite Your Friends.
Before It’s News® is a community of individuals who report on what’s going on around them, from all around the world. Anyone can join. Anyone can contribute. Anyone can become informed about their world. "United We Stand" Click Here To Create Your Personal Citizen Journalist Account Today, Be Sure To Invite Your Friends.
LION'S MANE PRODUCT
Try Our Lion’s Mane WHOLE MIND Nootropic Blend 60 Capsules
Mushrooms are having a moment. One fabulous fungus in particular, lion’s mane, may help improve memory, depression and anxiety symptoms. They are also an excellent source of nutrients that show promise as a therapy for dementia, and other neurodegenerative diseases. If you’re living with anxiety or depression, you may be curious about all the therapy options out there — including the natural ones.Our Lion’s Mane WHOLE MIND Nootropic Blend has been formulated to utilize the potency of Lion’s mane but also include the benefits of four other Highly Beneficial Mushrooms. Synergistically, they work together to Build your health through improving cognitive function and immunity regardless of your age. Our Nootropic not only improves your Cognitive Function and Activates your Immune System, but it benefits growth of Essential Gut Flora, further enhancing your Vitality.
Our Formula includes: Lion’s Mane Mushrooms which Increase Brain Power through nerve growth, lessen anxiety, reduce depression, and improve concentration. Its an excellent adaptogen, promotes sleep and improves immunity. Shiitake Mushrooms which Fight cancer cells and infectious disease, boost the immune system, promotes brain function, and serves as a source of B vitamins. Maitake Mushrooms which regulate blood sugar levels of diabetics, reduce hypertension and boosts the immune system. Reishi Mushrooms which Fight inflammation, liver disease, fatigue, tumor growth and cancer. They Improve skin disorders and soothes digestive problems, stomach ulcers and leaky gut syndrome. Chaga Mushrooms which have anti-aging effects, boost immune function, improve stamina and athletic performance, even act as a natural aphrodisiac, fighting diabetes and improving liver function. Try Our Lion’s Mane WHOLE MIND Nootropic Blend 60 Capsules Today. Be 100% Satisfied or Receive a Full Money Back Guarantee. Order Yours Today by Following This Link.