Page 126 - bneIntelliNews monthly country report Russia May 2024

products in their warehouses if they were certified after April 13. The sanctions do not affect metals produced before this date, nor can they target bilateral transactions or deals reached outside those two exchanges.
So far, the Russian metals industry has responded calmly. At this stage, sanctions strengthen their hand in their other dealmaking. After the restrictions landed, metal prices immediately shot up. On April 15, the price of nickel and copper went up 1.5%. aluminium rose 9.4%, an intraday rise last seen in 1987.
Russian metals have long been a huge part of LME’s warehouse. Russian aluminium at one point accounted for 90% of its stock, with buyers already reluctant to get involved for fear of sanctions. Traders may also have thought it was priced at a discount amid the sanctions uncertainty. Now that regulators have set out their positions and ruled accordingly, making the situation clearer, that discount could evaporate.
Higher metals prices, and the windfall earnings they are bringing for Russian firms, are unlikely to last long. Russia has already reduced its sales on global exchanges, so the rise in spot prices does not accurately reflect the real relationship between supply and demand for Russian products. Russia will continue trying to sell metals to China, Turkey and the Gulf states. Much will depend on China's economic performance, particularly its troubled construction sector. The industry has stagnated lately, suggesting there is unlikely to be higher demand for Russian metals.
The UK and US imposed new sanctions on Russia’s metal trade in the middle of April. Russia accounts for 6% of global refined nickel supply, 5% of primary aluminium output and 4% refined copper production. Importantly, though, an overwhelming share of the metals currently held on the LME is Russian-origin. Similar data are not available for the CME in Chicago. We suspect that any impact from these sanctions will be modest, similar to the ultimate effect of sanctions on Russia’s oil trade. After all, trade flows have already shifted amid European self-sanctioning and persistent speculation that a ban would be implemented. EU imports of Russian nickel were 18% lower in January – November 2023 compared to the same months in 2021. Consequently, Russia accounted for roughly one quarter of the EU’s nickel imports in Q4 2023, compared to around one half in Q4 2021. Instead, more Russian metal has flowed to sanctions-free countries, which is likely to continue. Indeed, China’s imports of metals from Russia have surged since the beginning of 2022. What’s more, China may be encouraged to snap up more of this metal at discounts, given it will no longer be LME-deliverable.
Biden administration announced sharp tariffs increase on Chinese steel and aluminium. The announcement of a threefold increase in tariffs on certain types of metal products from China—from 0% or 7.5% (introduced under Trump) to 25%—is expected during the US president's speech at the headquarters of the influential US steelworkers' union, United Steelworkers
126 RUSSIA Country Report May 2024 www.intellinews.com