Commodity Traders Gunvor and Vitol Poised to Withdraw Large Volumes of Russian Aluminium from LME Warehouses

Major commodity traders Gunvor and Vitol are reportedly preparing to withdraw significant quantities of Russian-produced aluminium from London Metal Exchange (LME)-approved warehouses in Gwangyang, South Korea. These withdrawals come amid shifts in the global metals market following Russia's invasion of Ukraine in 2022. After the invasion, "consumers turned away from the metal," which resulted in large quantities of Russian aluminum being deposited in LME warehouses.

Although primarily focused on energy, these oil and gas trading giants have been increasingly active in metals markets, seeking opportunities tied to the global transition to clean energy. Vitol has begun building a metals trading business with key hires in iron ore, aluminum, and copper. As of late February, LME data indicated that 97,750 metric tons of metal were scheduled for removal from Gwangyang's ISTIM-operated warehouses, valued at over $250 million. The waiting period for delivery was reported to be 81 calendar days.

The specific reasons behind Gunvor and Vitol's withdrawals remain unclear. Gunvor and Vitol's actions have contributed to a rise in spot aluminum prices, creating a premium over futures for delivery in three months, indicative of a tight market. While Vitol has already received some aluminium from the LME warehouses in Gwangyang, Gunvor has yet to take any delivery, according to sources. The cancellation of warrants, which accounted for 30% of Gwangyang's total inventory of 123,325 tons as of March 28, suggests that another 37,125 tons of aluminium is expected to exit the LME system.