Exclusive-Glencore delivers Russian-origin aluminium into LME system -sources

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By Pratima Desai and Mai Nguyen

(Reuters) - Commodity trader Glencore (OTC:GLNCY) has delivered significant amounts of Russian-origin aluminium to London Metal Exchange registered warehouses in Gwangyang, South Korea, two sources with direct knowledge of the matter said on Tuesday.

Another source with direct knowledge said that the aluminium delivered to Gwangyang was produced by Rusal.

The deliveries into LME warehouses highlight the difficulty facing Rusal, the world's largest aluminium producer outside China, as 2022 contracts expire and buyers shun Russian metal for 2023 contracts, one of the sources said.

Some aluminium buyers and end users in the transport, construction and packaging industries do not want Rusal's aluminium in their products. Unwanted metal such as Rusal's aluminium typically ends up in the LME system, a market of last resort for consumers and producers.

The sources did not say how much of Rusal's aluminium had been delivered by Glencore to LME warehouses in Gwangyang.

Glencore and the London Metal Exchange declined to comment. Rusal did not respond to Reuters' request for comment.

Rusal in April 2020 agreed a long-term contract to supply London-listed Glencore with 6.9 million tonnes of aluminium. Of that 344,760 tonnes would be delivered in 2020 and around 1.6 million tonnes a year between 2021 and 2024.

News that the Biden administration was weighing restricting imports of Russian aluminum as a possible response to Moscow's military escalation in Ukraine triggered a more than 7% spike in aluminium prices last week on Wednesday.

Aluminium traders said the knee-jerk reaction was due to worries about shortages if Rusal was sanctioned.

Rusal is the world's largest aluminium producer outside China, accounting for 6% of global supplies estimated at about 70 million tonnes this year.

Stocks of aluminium in LME warehouses jumped 65,825 tonnes to 433,025 tonnes on Friday. Of that, 23,525 tonnes were delivered to Gwanyang in South Korea and 44,675 tonnes to Port Klang in Malaysia.

"A few things over the past few days have made people sit-up, realise the difficulties facing Rusal," an aluminium industry source said.

Earlier this month the LME launched a discussion paper on the possibility of banning Russian aluminium, nickel and copper from being traded and stored in its system.