A special committee of the London Metal Exchange (LME) decided to temporarily suspend the issue of warrants for aluminum UC Rusal, the exchange said on Tuesday evening, April 10. The restriction will come into force on April 17 from 00.01 on London time due to the inclusion of UC Rusal in the US sanctions list.
Owners of aluminum produced by UC Rusal plants (14 kinds of metal under the company's brand were traded on the exchange), who want to sell it through the exchange, will have to prove that this will not violate the sanctions, LME said. Without such evidence, the exchange will not accept metal for storage at its warehouses. This decision of the exchange is conditioned by the risk of getting under American sanctions.
UC Rusal does not disclose what proportion of the metal it sold through LME. According to analysts ACRA Maxim Khudalov, this is no more than 10-20%. In his opinion, the suspension of the issue of warrants is a natural reaction of the exchange. And UC Rusal will be able to redirect unrealized metal from the exchange to direct supplies to the Asian and domestic markets. "UC Rusal's departure from the exchange will reduce the supply [of metal] and lead to an increase in prices," the analyst predicts.
LME since 2012 belongs to the Hong Kong Stock Exchange (HKEx). It operates with approximately 550 warehouses in the US, Europe and Asia. Most of them are concentrated in America. The exchange does not own warehouses, it does not own or operate them, but simply authorizes those who are subject to the rules of the exchange. Near the LME warehouses, as a rule, there are informal sites, which for various reasons did not pass the certification, but work under the conditions of the exchange, Vedomosti was told by a person close to LME.
Official and informal LME warehouses show good subordination, says an analyst at a major bank. However, physically, metal is rarely traded through a stock exchange and in small quantities, as a rule, companies use the services of traders or contracts are concluded directly with consumer companies, he says.