Norsk Hydro ASA appealed to the London Metal Exchange last week to reverse its decision not to ban Russian-source aluminium, and Rusal responded by accusing Hydro of seeking to punish Russian aluminium producers for its own benefit.
Reuters reported on the letter to the LME last week, and the LME responded by saying that it would continue to abide by all international sanctions. The LME also promised to watch Russian aluminium deposits for concerning behavior.
“We note that all metals of Russian origin continue to be consumed by a broad section of the market, and we will remain vigilant in respect of this matter.”
In its letter, Hydro asked the LME whether it has consulted the Financial Conduct Authority (FCA), which is Great Britain’s market regulator, as to whether pulling Russian aluminium from the LME would work harm to the market.
In response, the FCA said it was monitoring the situation.
“We continue to engage with the London Metal Exchange on its controls to ensure it meets its obligations to maintain fair and orderly markets, including in the LME aluminium market.”
“We expect the LME to utilise necessary controls to meet its regulatory obligations,” the FCA continued.
Rusal said in a statement that pulling Russian aluminium from LME stores would be “highly destructive” to the global aluminium market.
“Rusal considers these comments to be aimed at destabilising the market and driving anti-competitive behaviour […] hence to the benefit of the competitor.”
Rusal went on to say that it “continues to witness a broad acceptance of its low-carbon aluminium to a wide range of global consumers from across the world.”
Norsk Hydro’s Chief Financial Officer Paal Kildemo told Reuters that Russian aluminium in the system continues to be a problem.
“If you are a consumer looking to hedge exposure on LME and if 80% of it is Russian aluminium then you might consider using another market.”
“There is still a risk that even more Russian aluminium will be delivered to LME further weighing on the reference price,” he went on.
The LME’s principal competitor Shanghai Futures Exchange trades in aluminium, but traders must be affiliated with a Chinese company, and moving funds in and out of the country is difficult.