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LME suspends Russian nickel from entering two British warehouses

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LME suspends Russian nickel from entering two British warehouses

Highlights

Suspension prompted by additional 35% customs fee

Nornickel sells most of output to end-users, traders directly

The London Metal Exchange has suspended placing Russian-origin nickel on warrant in its warehouses in the UK, an LME spokesperson told S&P Global Commodity Insights Aug. 17.

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The UK government had recently imposed a 35% additional duty on the imports of nickel of Russian and Belarussian origin that will affect shipments initiated from July 20.

As a result, any metal subject to the duty and placed on warrant in LME-listed warehouses in the UK cannot be imported into the UK without significant additional cost. The cost of shipping the metal elsewhere could be prohibitive too, according to a statement the LME emailed to S&P Global.

"Therefore, with respect to Russian-produced nickel, there is a significant risk that there will be a dislocation between the price of the traded metal and the price of the underlying physical metal," it said.

The LME announced the suspension of Russian-origin material to minimize this risk. The move does not prohibit Russian nickel from being traded on the exchange though, according to the LME spokesperson.

The Russian-origin nickel products now banned from UK storage comprise nickel cathodes (full plate and cut), pellets, briquettes and rounds. Nickel that comes in powders or solutions are not LME-traded commodities in general.

Nornickel is the only company producing nickel cathodes in Russia -- at its Kola division. It also makes nickel, including in cathodes, at its Harjavalta refinery in Finland, which accounted for a quarter (47,200 mt) of Nornickel's total production of nickel in 2021. This refinery's output is not subject to the LME suspension as it its final product, although derived from Russian feedstock, is not considered to be of Russian origin.

There is currently no Russian nickel in LME-listed warehouses in the UK, the LME said.

"The LME has many warehouses around the world, and Nornickel can use any of those outside the UK," an industry source who wished to be unnamed said.

"For Nornickel, keeping nickel in warehouses and trading it on commodity exchanges in general is not of any significant scale at all," the source said. "The company ships the majority of its nickel under direct contracts with buyers, and the metal it sells on any exchange and therefore ships to respective warehouses is tiny in proportion."

As of Aug. 15, LME's UK warehouses -- in Hull and Liverpool -- were holding 198 mt of nickel in all, according to LME data. This is less than 0.5% of the overall nickel stock within the LME network of warehouses worldwide, which held 56,346 mt of nickel in total on the same day.

The majority of the metal was concentrated in warehouses in the Netherlands (25,072 mt, or 44.5% of the total), Singapore (12,582 mt, or 22.3%) and Malaysia (10,626 mt, or 18.8%).

In April, the LME had suspended the placement of Russian-branded copper, lead, primary aluminum and aluminum alloy in its UK-registered warehouses due to the additional duties imposed by the UK on Russian base metal imports, S&P Global reported earlier.