July 26, 2022

The LME will not ban nickel from Russia’s top producer, Norilsk Nickel. Reuters reported this revelation late week. This disclosure from the LME comes despite the UK government sanctioning Norilsk Nickel’s president, Vladimir Potanin, late last month. Last Friday, the LME stated it continues to evaluate the British government placed on Potanin in June. The exchange has not disclosed how much nickel in its system is from Norilsk Nickel. According to Reuters, Norilsk Nickel is the world’s largest producer of refined nickel. Banning Russian nickel or other metals could lead to global shortages.

Even though Russian nickel has not been banned from the LME system as of yet, the exchange would have to ban Russian metal if sanctions did occur, per UK law. End-users such as stainless-steel producers who are worried about sanctions, or are generally bullish on price, could hedge future needs by buying swaps or call options, both of which would establish a maximum price. Such positions are basic for end-user hedging; however, they can result in opportunity costs or cash costs if metal prices decrease. Please contact AEGIS for specific strategies that fit your operations. (7/26/2022)

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