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LBMA suspends six Russia gold, silver refineries from Good Delivery list

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(Kitco News) - The global precious metals market could see another significant disruption in its supply chain after the London Bullion Market Association (LBMA) has suspended the membership of six Russian precious metals refiners.

In a press release published Monday, the LBMA said that in light of UK/EU/US sanctions and to ensure an orderly market, it has suspended the following gold and silver refiners immediately:

  • JSC Krastsvetmet (gold and silver)

  • JSC Novosibirsk Refinery (gold and silver)

  • JSC Uralelectromed (gold and silver)

  • Moscow Special Alloys Processing Plant (gold)

  • Prioksky Plant of Non-Ferrous Metals (gold and silver)

  • Shyolkovsky Factory of Secondary Precious Metals, SOE (gold and silver)

"These six refiners will no longer be accepted as Good Delivery by the London Bullion market until further notice," the LBMA said.

In an email response to Kitco News, Ruth Crowell chief executive of the LBMA said, "We do not expect there to be a huge impact on the global supply chain. Russia is primarily a domestic gold market."

Richard Weaver, president of the Accredited Precious Metals Dealers and the Professional Numismatists Guild, said that it is difficult to determine the full impact of the LBMA's move as they would have to see what companies are supplied by the six refineries.

Rising oil and commodity prices mean gold's uptrend will last long after Ukraine war is resolved

However, he added that the global precious metal supply chain remains fragile as it recovers from the global COVID-19 pandemic. He said that any disruption could impact the physical market.

"Right now, the physical market is extremely tight everywhere you look," Weaver said. "Any physical metal that comes out of the marketplace is going to have an impact."

Weaver also said that another disruption in the global market could lead to higher premiums for physical gold and silver bullion.

However, not all bullion dealers are worried that the LBMA has suspended the membership of Russian refiners.

Bart Kitner, president, Kitco Metals Inc, said that mints still have a ready supply of raw metals for their production.

"Supply shortages on retail products are related to production capacity. Premiums go up when the demand for retail products is greater than the capacity to manufacture these products. Right now, premiums are high because of the limitations of the manufacturing processes. There's no shortage at all of the metals needed to make coins and bars," he said.

Gainesville Coins precious metals expert Everett Millman also said issues within the global physical metals market are less to do with the latest move by the LBMA but are a reflection of the overall uncertain environment.

He added that he doesn't see the six refineries as significant players in the global market. However, he added that the global supply chain remains at risk as the war in Eastern Europe could impact the movement of precious metals.

"Russia is not one of the leading exporters of gold and silver," he said. "They will also be able to get around the sanctions if they start trading on the Shanghai Gold Exchange, so this won't have a material impact on the market.

Millman also noted that the supply issues for mints are more to do with a labor market shortage impacting manufacturing than a lack of raw supply.

Millman said that he doesn't expect premiums to shoot much higher from their already elevated levels.

For other bullion dealers, they said they are waiting to see how long the sanctions last. While Russia may not be a significant gold or silver exporter, it is the second-largest producer in the world, just behind China.
Most major mints including the U.S. Mint, Royal Canadian Mint, Perth Mint, to name a few use a domestic supply for their bullion products.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.