Glencore and Trafigura’s Sanctions Games Are Draining the LME
- Orders to withdraw aluminum jumped sharply this week
- US and UK have announced new restrictions on Russian metal
The play raises questions about whether the UK government was aware of the opportunities it was creating for traders.
Photographer: Simon Dawson/BloombergThe world’s two biggest metals traders are moving to withdraw large volumes of aluminum from the London Metal Exchange in a complex trade made possible by new UK sanctions on Russian metal, raising questions about unintended consequences from the new rules.
Trafigura Group and Glencore Plc plan to withdraw the metal to profit from a new multi-tiered system created by the sanctions, according to people familiar with the matter. The trade involves ordering out Russian metal and then re-registering it on the LME under a new, less-desirable category, while striking profit-sharing deals with warehouses to receive a sliver of the rent paid by future owners for as long as it sits there. (The longer it sits, the more money they stand to make.)