Shanghai is the sole commodities bourse to stay open to Russian aluminium, copper and nickel as sanctions drive Moscow towards China
- The London Metal Exchange’s ban on newly produced Russian aluminium, copper and nickel is likely to drive Chinese imports even higher
- It also leaves the Shanghai Futures Exchange as the only major commodities bourse in the world to accept Russian shipments of the three metals
Sanctions by the United States and the United Kingdom on Russian metals will cement China as Moscow’s buyer of last resort for key commodities, and enhance Shanghai’s role as a venue to set prices for materials crucial to the global economy.
The London Metal Exchange’s ban on newly produced Russian aluminium, copper and nickel is likely to drive Chinese imports even higher. It also leaves the Shanghai Futures Exchange as the only major commodities bourse in the world to accept Russian shipments of the three metals.
“The liquidity of Russian metals in European and American markets may further decline, and global trade flows will also be reshaped,” said Wang Rong, a senior analyst at Shanghai-based broker Guotai Junan Futures.
Energy market sanctions imposed on Moscow in the wake of its invasion of Ukraine have already had a dramatic impact on China’s buying habits. Russia leapt above Saudi Arabia to become the biggest source of Chinese crude oil imports last year. It is also now No. 2 for coal and is likely to become Beijing’s biggest supplier of natural gas this year.
Even without formal sanctions, China’s imports of Russian aluminium have hit record levels. Russian aluminium giant United Rusal International generated 23 per cent of its revenue from China last year, compared with just 8 per cent in 2022. Rusal has also taken a 30 per cent stake in a Chinese alumina plant to plug a gap in supplies of the key ingredient amid disruptions triggered by the war in Ukraine.
The new sanctions will push more exports of Russian metal to countries outside US and UK jurisdictions, especially China, according to Guotai Junan. The extra supply will also encourage the export of metals produced in China as more material pools within its borders, the broker said in a note. China is the world’s biggest producer of refined copper and aluminium and a major player in nickel via investments in Indonesia.
