November 25, 2022

Starting in January 2023, the LME will produce monthly reports detailing how much Russian metal is in LME warehouses. However, Rusal and Alcoa request that the LME reports detail metals of all origins, not just those from Russia. AEGIS notes that this is a rare amount of agreement for the two companies, as Alcoa previously demanded that the LME ban all Rusal and other Russian-produced metals from the exchange. However, earlier this month the LME dismissed such a ban. In September and October, Alcoa sent three letters to the LME requesting that Russian metal be banned from the exchange. At that time, Alcoa felt that allowing large volumes of Russian metal into the LME system could exert undue influence on LME aluminum prices and might upset the global aluminum supply and demand balance. These letters were in response to the discussion paper the LME launched in late September outlining possible actions against Russian metals producers, including an outright ban on their metals. (Source: Reuters)

The LME Aluminum 3M Select contract is up nearly 14% from the late-September lows, with the last trade at $2,378/mt (7:00AM CST). However, allowing large volumes of Russian metal onto the LME could push prices lower. Aluminum producers that are concerned about decreasing prices could consider selling swaps or buying put options. Such positions are standard for producer hedging; however, they can result in opportunity costs or cash costs if metal prices increase. Please contact AEGIS for specific strategies that fit your operations. (11/25/2022)

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