By Pratima Desai and Eric Onstad
LONDON, Feb 8 (Reuters) - Commodity trader Glencore has deposited more than 100,000 tonnes of aluminium in London Metal Exchange registered warehouses in the South Korean port of Gwangyang, two sources with knowledge of the matter told Reuters. Rusal produces aluminium in Russia and accounts for 6% of global supplies estimated at around 70 million tonnes this year.
Neither Rusal nor its metal has been targeted by sanctions against Russia following its invasion of Ukraine. London-listed Glencore declined to comment. A Rusal representative said the company has not delivered any aluminium to LME warehouses and does not plan to. Many buyers and consumers in the transport, packaging and construction industries chose to renew their contracts to buy Russian aluminium.
Some did not because of Russia's invasion of Ukraine. Some metal producers worry large amounts of unwanted Russian aluminium in LME warehouses will depress benchmark prices on the exchange, referenced in their contracts with consumers. Aluminium prices on the LME hit a four-week low of $2,471 a tonne on Wednesday.
Last month, sources told Reuters that Glencore had delivered 40,000 tonnes of Russian aluminium, taking its deliveries to LME warehouses in Gwangyang to at least 150,000 tonnes. Glencore also delivered Russian aluminium into LME warehouses in Gwangyang in October, according to sources, who did not detail the quantity.
"Russian aluminium in Gwangyang has been building for some time, it just wasn't warranted," one of the sources with knowledge of the matter said.Warehouse operators issue a warrant conferring ownership when metal enters the LME's global warehouse storage network, comprising more than 500 warehouses in 32 locations. Metal that is stored in LME warehouses but is not on LME warrant is off warrant.
Overall aluminium stocks at 495,750 tonnes are up more than 30% since Jan. 20, which has helped widen the discount for the cash over the three-month aluminium contract to nearly $40 a tonne. Glencore has a long-term contract with Rusal for 6.9 million tonnes of aluminium. Of that, around 1.6 million tonnes a year would be delivered between 2021 and 2024.
After an industry consultation, the LME last November decided not to ban Russian metal from being traded and stored in its system because a significant portion of the market still planned to buy the country's metal in 2023. In the absence of a ban, the LME said it was likely "additional tonnages of Russian metal" will eventually be delivered into LME-approved warehouses, but that there is no evidence that this would create disorder.
(Reporting by Pratima Desai and Eric Onstad; Editing by Josie Kao)
