The authorities have opted to maintain market stability over imposing a ban on Russian metal sales, following the sanctions imposed after Russia's invasion of Ukraine. The decision to divide Russian metal into two categories based on production dates, rather than implementing a wholesale ban, has raised concerns about an increase in metal on warrant and potential market instability.

The new rules categorize Russian metal into type 1, produced before April 13, and type 2, produced on or after that date. This approach raises the risk of more metal going on warrant, which could increase the amount of less usable metal for people in the UK. However, the exact amount of Russian metal off-warrant and its potential impact on the market is uncertain.

There are currently over 1.2 million tonnes of metal in LME warehouses, with 927,477 tonnes of open-tonnage and the remainder cancelled. According to the latest data, 39.6% of the total open-tonnage stocks in LME warehouses on March 28 were of Russian origin.

Companies with contracts to take Russian metal are likely to renegotiate the clause to take the metal at a discount or opt to warrant type 1 metal and use type 2 metal for physical delivery. Russian companies may push to sell type 1 metal in the physical market and avoid accepting a discount.

The LME has added onerous steps to the procedure for putting metal on-warrant, which could act as a deterrent and lead market participants to opt for trading physical material instead of warranting metal. The decision to prioritize market stability over a ban on Russian metal sales is aimed at avoiding delivery failures and market instability, but it also raises concerns about the potential increase in metal on warrant and its impact on the market.