India could absorb more Russian metals after LME ban, say experts

Countries like India and several other non-US and European nations could buy more Russia-origin metals following last week’s London Metal Exchange (LME) ban.

As expected, the LME has banned the delivery of Russian metals produced from April 13, 2024, onwards due to the ongoing Russia-Ukraine conflict.

Reacting to the ban Naveen Mathur, Director – Commodities & Currencies, Anand Rathi Shares said that countries like India, China and Turkey might use this sanction to absorb the extra-produced Russian metals.

“Meanwhile, this could have limited repercussions on short-term fluctuations and the evolving steel sector in India amidst changing global dynamics,” Mathur told IANS.

Queried about the impact of LME’s sanctions against Russian metals globally, Mathur said: “This move could slightly impact the metals globally apart from US trade as Russia is a major producer of aluminium, copper and nickel and it accounts for about 6 per cent of global nickel production, 5 per cent of aluminium and 4 per cent of copper.”

He said, there will be a minimal impact on supplies in the US as it has been less dependent (less than 1 per cent) on Russia for aluminium.

“The actions are likely to solidify China’s role as the final buyer for Moscow’s goods, possibly resulting in Russian supplies being sold at increasingly lower prices compared to standard LME prices,” Mathur remarked.

As to the impact on the metal prices, Mathur said the prices of aluminium, copper and nickel will move up in the short term and the market will remain volatile mainly due to large uncertainty in supply and LME deliver post-sanctions changes.

Recently Vedanta Aluminium’s CEO John Slaven had told IANS: “If the US and Europe impose sanctions on Russian aluminium now being sold into LME, then there will be a price increase. Further, the ending of the conflict between Russia-Ukraine and the easing of the interest rates in the US is positive for the global economic activity which in turn would drive the demand for metals.”

According to Slaven, the demand growth in India over the past three years has been about 14 per cent on average. This year, it is 16 per cent and might close the fiscal with a 17 per cent increase.

Slaven said the aluminium demand in India is about five million tonnes and domestically produced aluminium is about 2 million tonnes. So, about 60 per cent of the metal units consumed are imported. Scrap imports account for 1.9 million tonnes and the balance is imported in the form of downstream products.

With the Indian economy in the growth cycle, the metal demand will be high from infrastructure building and other sectors. And, hence the demand will be high for several years to come, unlike the advanced economies, Slaven had said.

Mathur said the LME ban on Russian metals will slightly boost demand for non-Russian metals, which could positively affect LME prices for a shorter period.

“Ultimately, the new restrictions won’t change these three metals’ (copper, aluminium, nickel) supply and demand balances. However, traders might price in for further reduction in supply chains, the sanctions are unlikely to prevent Russia from being able to sell its metals,” Mathur said.