Glencore withdrew approximately 15,000 tonnes of Russian copper from London Metal Exchange warehouses in Rotterdam over three trading sessions, planning to deliver the metal to China amid severe supply tightness in the world’s largest copper market. The withdrawals pushed LME copper inventories to their lowest level in a year, highlighting the growing desperation among traders to secure physical metal for Chinese buyers.
Glencore, a British multinational commodity trading and mining company, ranks among the world’s largest diversified natural resource companies with operations spanning coal, copper, zinc, nickel, and oil trading. The company operates mines and smelters across multiple continents while maintaining one of the most extensive global trading networks in industrial metals. Despite reducing direct business with Russia since 2022, Glencore continues trading Russian metals through established exchanges like the LME, where such transactions remain permissible under current sanctions frameworks.
Market Dynamics Driving Russian Copper Demand
The trade represents a response to extraordinary market conditions in China, where copper premiums have reached five-year highs and the Shanghai Futures Exchange displays steep backwardation. Immediate delivery contracts trade at substantial premiums to future deliveries, indicating severe near-term supply constraints relative to demand.
Chinese copper inventories experienced record drawdowns following price declines below $8,500 per tonne in April, though stocks have stabilized as prices recovered. The Yangshan premium, which measures the additional cost Chinese buyers pay above LME prices for physical copper, surged from $35 per tonne in February to $94 by late April, reaching its highest level since November 2023.
Trump administration tariff threats on copper imports redirected substantial volumes toward the United States, creating artificial tightness in Asian markets. This redirection prompted traders including Mercuria Energy Group and Trafigura Group to draw down LME stocks to supply Chinese demand, with US COMEX copper inventories surging 61% since March.
Russian Copper Accumulation in European Warehouses
Russian copper has accumulated in LME warehouses, particularly across Europe, where nearly all copper inventory originates from Russian producers. Many Western consumers and financiers have avoided Russian supplies since the Ukraine invasion began in 2022, creating a bifurcated market where Russian metal trades at discounts to other origins.
The geographic distance between European storage locations and Chinese consumption centers previously made Russian copper economically unviable for Asian delivery. However, current premium levels in China have made even long-distance transportation profitable, enabling traders to arbitrage the price differential.
European LME warehouses now hold predominantly Russian copper that was previously considered stranded inventory. The metal’s accumulation reflects both voluntary corporate sanctions and logistical challenges in reaching willing buyers in Asia.
Sanctions Framework and Trading Restrictions
US and UK sanctions implemented in April 2024 prohibit delivery of newly produced Russian copper, aluminum, and nickel to major exchanges including the LME and Chicago Mercantile Exchange. However, Russian metal produced before April 13, 2024, remains tradeable on these platforms, creating a two-tier market for Russian copper.
Glencore stated in 2022 that it would not enter new trading business involving Russian commodities unless directed by government authorities, yet continues participating in existing LME transactions. This approach aligns with current sanctions frameworks that permit trading of pre-existing Russian metal inventories while restricting new production flows.
The sanctions regime has created market distortions where older Russian metal trades at discounts while newer production seeks alternative distribution channels. This dynamic may intensify if geopolitical tensions persist or if additional restrictions target remaining Russian metal trade.
Strategic Positioning and Future Implications
Glencore‘s trade potentially positions the company to benefit from any sanctions easing in the event of a Ukraine peace agreement. Mercuria Energy Group previously established substantial positions in LME aluminum backed by Russian metal, betting that sanctions relief would increase the relative value of Russian materials.
The transaction demonstrates how market fundamentals can override geopolitical preferences when supply constraints become severe enough. Chinese buyers remain willing to purchase Russian copper despite broader Western sanctions, creating arbitrage opportunities for traders capable of managing logistical and reputational challenges.
Current market dynamics suggest continued demand for Russian copper in China as long as supply tightness persists and premiums remain elevated. The trade highlights the interconnected nature of global commodity markets and the difficulty of completely isolating specific supply sources when physical shortages emerge.
Copper remains essential for electrical infrastructure, renewable energy systems, and industrial manufacturing, with China consuming over half of global production. Current market conditions reflect the ongoing challenge of balancing geopolitical objectives with fundamental supply-demand dynamics in critical industrial metals. The Glencore transaction illustrates how sophisticated traders navigate complex regulatory environments while capitalizing on market dislocations created by sanctions regimes and trade policy uncertainties.
