The London Metal Exchange should reconsider its decision not to ban the use of Russian aluminum in its warehouse network, since the large volume of its stocks jeopardize the status of the reference contract, according to a letter from Norsk Hydro.
The LME stated that it would continue to reflect all relevant government sanctions and tariffs, and monitor any market orderliness concerns in respect of Russian metal.
"We note that all metals of Russian origin continue to be consumed by a broad section of the market, and we will remain vigilant in respect of this matter," the LME said in a statement.
Rusal, the largest aluminum producer in Russia, said that excluding Russian metal from the supply chain would be "extremely disruptive" for the market structure in terms of market liquidity.
"Rusal believes that these comments are aimed at destabilizing the market and encouraging anti-competitive behavior ... therefore, in the interests of a competitor," Rusal was quoted by metals-expert.com as saying.
Russian aluminium amounted to 80% of available aluminium inventories in LME-registered warehouses in June compared with 68% in May, 41% in January and less than 18% last October.
Some analysts estimate the discount for Russian aluminium at $100-$300 per metric ton, Norsk Hydro said.
While there are no international sanctions on Russian metal, many consumers are shunning aluminium produced by Rusal, which accounts for 6% of global supplies.
Alex Shishlo for Rough&Polished
