Rise in Metal Prices Due to Sanctions Against Russia

New sanctions against Russia are driving up metal prices

On April 12, 2024, authorities in the United Kingdom and the United States announced new sanctions on Russian metals, including nickel, copper, and aluminum. These metals are traded on metal exchanges in both countries, including the London Metal Exchange is by far the best known. On the LME, paper metal contracts are traded, with the underlying metal actually stored in 450 warehouses spread across Europe, the U.S., and Asia. This new sanction makes it impossible to trade metal produced on or after April 13, 2024, on the metal exchanges. Furthermore, the Americans have announced that metals physically produced in Russia will no longer be allowed into the United States. 

Rising Metal Prices

The initial expectation was that metal prices on the London Metal Exchange would rise due to the sentiment surrounding this news. After all, Russia is a major producer of nickel and copper, including Nornickel and aluminum. The new sanctions were expected to cause a shortage in the market. Even before the actual announcements were made, a rise had already been observed on the LME. 

On Monday, March 4, 2024, a metric ton of copper on the LME was quoted at
€7,778. Just under two weeks later, on March 18, the price had already risen to €8,237—an increase of nearly 6%, likely fueled by speculation about further tightening of sanctions against Russia. 

"In the space of 6 weeks, the buyer's price has risen by more than 12%"

On April 15, the copper price rose to €8,800 per metric ton, where it continued to fluctuate around that level later in the week. In just six weeks, the copper price has thus risen by more than 12%. A similar pattern can be seen with aluminum, which was trading at €2,011 per metric ton on March 4, only to rise 10% to €2,200 per metric ton exactly one month later. Immediately after the imposition of the most recent sanctions, the aluminum price rose to €2,364 and currently stands above €2,400 per metric ton. This represents an increase of nearly 20% over the course of six weeks. We are closely monitoring these prices. You can find the current metal prices, copper prices and aluminum prices in our overview! 

Is Russia the leading producer of metal? 

Given the developments described above, one might get the impression that Russia is a major producer of metals used in industry worldwide. Although Russia is indeed a major metal producer, its share of global production amounts to only 5% for aluminum, 6% for refined nickel, and 4% for copper. Analysts believe that the sanctions will not have a noticeable impact on global availability, partly because all Russian metals that can be proven to have been produced before April 13 may still be traded.

Dumping of Russian Metal on the Non-EU/U.S. Market

Industrial users of metals fear that Russian producers will offer copper, aluminum, and nickel outside the EU and the U.S. at significant discounts in order to still generate revenue from their raw materials. Major consumers such as China and India are expected to be eager to take advantage of these offers, without regard for the EU and the U.S. 

How this scenario unfolds in the coming months may serve as a preview of the geopolitical chess game that will regularly resurface in the coming years, centered on the availability of raw materials needed for the climate transition. 

China currently accounts for 95% of global production of the metals needed for the climate transition, which suggests that we should actually be referring to a raw materials transition.