By Pratima Desai and Mai Nguyen
(Reuters) – Commodities trader Glencore has delivered significant quantities of Russian-origin aluminum to registered warehouses of the London Metal Exchange in Gwangyang, South Korea, two sources with direct knowledge of the matter said on Tuesday. .
Another source with direct knowledge said the aluminum delivered to Gwangyang was produced by Rusal.
Deliveries to LME warehouses highlight the difficulties facing Rusal, the world’s largest aluminum producer outside China, as 2022 contracts expire and buyers shun Russian metal for contracts. 2023, one of the sources said.
Some aluminum buyers and end users in the transportation, construction and packaging industries do not want Rusal’s aluminum in their products. Undesirable metals such as aluminum from Rusal typically end up in the LME system, a market of last resort for consumers and producers.
The sources did not specify how much of Rusal’s aluminum was delivered by Glencore to LME’s warehouses in Gwangyang.
Glencore and the London Metal Exchange declined to comment. Rusal did not respond to Reuters request for comment.
Rusal entered into a long-term contract in April 2020 to supply London-listed Glencore with 6.9 million tonnes of aluminium. Of these 344,760 tons would be delivered in 2020 and around 1.6 million tons per year between 2021 and 2024.
News that the Biden administration viewed restricting Russian aluminum imports as a possible response to Moscow’s military escalation in Ukraine on Wednesday sparked a spike in aluminum prices of more than 7% in the past week.
Aluminum traders said the knee-jerk reaction was due to concerns over shortages if Rusal were sanctioned.
Rusal is the world’s largest aluminum producer outside China, accounting for 6% of global supplies estimated at around 70 million tonnes this year.
Aluminum stocks in LME warehouses jumped 65,825 tonnes to 433,025 tonnes on Friday. Of this, 23,525 tons were delivered to Gwanyang in South Korea and 44,675 tons to Port Klang in Malaysia.
“There are things over the past few days that have made people sit up and realize the difficulties that Rusal is facing,” an aluminum industry source said.
Earlier this month, the LME launched a discussion paper on the possibility of banning the trading and storage of Russian aluminium, nickel and copper in its system.
(Reporting by Pratima Desai in London and Mai Nguyen in Hanoi Editing by Marguerita Choy)