In response to the UK Government's addition of new regulations on Russian metals sanctions on 12 April 2024, the LME today issued Circular 24/171, setting out the LME's understanding and guidance on the latest sanctions. An overview of the impact of the UK government's latest sanctions and trade Licenses and OFAC's announcement on the LME, LME Clear, members and clients.
It is important to note that the LME's interpretation does not constitute legal guidance and member companies and clients should seek independent legal advice to assess the impact and applicability of the sanctions on their business.
For the full text of Circular 24/171, please refer to:
https://www.lme.com/api/sitecore/MemberNoticesSearchApi/Download?id=31196943-f99d-4fa5-958e-a13cd80163c9
Key information excerpts are as follows (if there is any discrepancy with the English version, the English version shall prevail) :
The revised sanctions enable the LME, LME Clear, UK members and UK customers to continue to "acquire" Russian metal invoices (including issuing, creating and holding them), as long as the relevant metal was produced before 13 April 2024. If Russian metal is produced on or after 13 April 2024, a UK person may not "acquire" the metal in the form of a warehouse receipt or otherwise.
As a result, the LME will immediately suspend warehouse receipts for related metals produced on or after 13 April 2024.
In addition, the revised sanctions classify Russian metal warehouse receipts (regardless of the specific production date of the relevant metal, but must be before April 13, 2024) into two categories:
The impact of the revised sanctions package on various market participants:
a) Non-UK customers (as well as self-employed non-UK members) of a member who is not in a sanctions jurisdiction may continue to carry out normal LME activities (generating, buying and selling receipts, cancelling receipts and taking delivery), except that receipts cannot be generated for related metals produced on or after 13 April 2024.
b) UK customers (and self-employed UK members) may engage in the following activities:
i) Register a warehouse receipt for the relevant metal (a warehouse receipt cannot be generated for the relevant metal produced on or after 13 April 2024).
ii) For Type 1 Russian Warrants, you can continue to engage in LME trading activities. UK members (on behalf of themselves or UK clients) and UK clients can also now cancel warehouse receipts or delivery.
iii) For Type 2 Russian Warrants, you can continue to engage in LME trading activities. However, the UK Member (on behalf of himself or the UK client) and the UK client cannot cancel the warehouse receipt or delivery.
c) UK and non-UK members may continue to provide LME business-related services to their UK and non-UK clients as long as the client is qualified. For example, UK members can continue to help non-UK customers register a receipt for Russian metal (as long as the relevant metal was produced before 13 April 2024), hold a Russian metal receipt, transfer a Russian metal receipt, or cancel a receipt and take delivery.
d) Warehousing companies registered in the UK and London agents may continue to provide services to their UK and non-UK customers, provided the customer has the relevant qualifications and the metal compound the above registered warehouse receipt requirements.
Circular 24/171 also mentions requirements for record-keeping, registration of subsequent warehouse receipts, reissuance of Category 1 Russian metal receipts and their circulation between different warehouses.
The LME understands that the revised sanctions package will cause uncertainty in the market, and the inventory data shows that the market remains willing to accept Russian metals. Russian metals accounted for 58% (37,600 tons) of metal shipments in January, 94% (44,375 tons) in February, and 88% (38,775 tons) in March. As of the end of March, Russian aluminum registered warehouse receipts accounted for 91% of the open position.
