Glencore delivers Russian-origin aluminum into LME system

Aluminum smelter. (Reference image by UC Rusal Photo Gallery, Wikimedia Commons).

Commodity trader Glencore has delivered significant amounts of Russian-origin aluminum to London Metal Exchange registered warehouses in Gwangyang, South Korea, two sources with direct knowledge of the matter said on Tuesday.

Another source with direct knowledge said that the aluminum delivered to Gwangyang was produced by Rusal.

The deliveries into LME warehouses highlight the difficulty facing Rusal, the world’s largest aluminum producer outside China, as 2022 contracts expire and buyers shun Russian metal for 2023 contracts, one of the sources said.

Some aluminum buyers and end users in the transport, construction and packaging industries do not want Rusal’s aluminum in their products. Unwanted metal such as Rusal’s aluminum typically ends up in the LME system, a market of last resort for consumers and producers.

The sources did not say how much of Rusal’s aluminum had been delivered by Glencore to LME warehouses in Gwangyang.

Glencore and the London Metal Exchange declined to comment. Rusal did not respond to Reuters’ request for comment.

Rusal in April 2020 agreed on a long-term contract to supply Glencore with 6.9 million tonnes of aluminum. Of that 344,760 tonnes would be delivered in 2020 and around 1.6 million tonnes a year between 2021 and 2024.

News that the Biden administration was weighing restricting imports of Russian aluminum as a possible response to Moscow’s military escalation in Ukraine triggered a more than 7% spike in aluminum prices last week on Wednesday.

Aluminum traders said the knee-jerk reaction was due to worries about shortages if Rusal was sanctioned.

Rusal is the world’s largest aluminum producer outside China, accounting for 6% of global supplies estimated at about 70 million tonnes this year.

Stocks of aluminum in LME warehouses jumped 65,825 tonnes to 433,025 tonnes on Friday. Of that, 23,525 tonnes were delivered to Gwanyang in South Korea and 44,675 tonnes to Port Klang in Malaysia.

“A few things over the past few days have made people sit up, and realize the difficulties facing Rusal,” an aluminum industry source said.

Earlier this month the LME launched a discussion paper on the possibility of banning Russian aluminum, nickel, and copper from being traded and stored in its system.

(By Pratima Desai and Mai Nguyen; Editing by Marguerita Choy)

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