Analysts say that US and UK sanctions on Russia will soon cement China as Moscow’s buyer of key commodities as the West tightens their sanctions. The London Metal Exchange (LME) has banned newly-produced Russian aluminium, copper and nickel and reports say this is likely to drive Chinese imports even higher. It also leaves the Shanghai Futures Exchange as the only major commodities bourse in the world to accept Russian metals.
Russia has faced severe sanctions since its invasion of Ukraine in 2021. A number of companies, including McDonalds, wasted little time in exiting the country. However, Russia has been able to find alternatives to trade with – and China is a major partner. The two country’s foreign ministers met recently to forge closer ties.
Added to this, the BRICS+ countries have been trading with Russia – mostly ignoring western sanctions.
In response to the latest sanctions on Russian metals, prices have swung sharply on the LME, with aluminium surging by a record number before later erasing most of its gains, as traders digested what had happened.
But the curbs on aluminium, nickel and copper announced on the LME don’t prevent Russia from selling its metals to buyers outside the US or UK.
Russia accounts for about 6% of global nickel production, 5% of aluminium and 4% of copper. For nickel, Russia is the world’s second-largest producer of refined class 1 nickel behind China, the only type that is deliverable on the LME. China’s imports of primary aluminium from Russia hit new highs last year, and this trend is likely to continue. China is likely to continue to buy discounted Russian material to use domestically and export its aluminium products into Europe and the US to fill the gap left by Russian import ban.
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