Washington And London Announce New Sanctions Aimed At Russian Metal, Limiting Global Supply

What Happened?

On Friday, the U.S. and U.K. governments took further action against the Russian economy in an effort to diminish the country's ability to continue its ongoing invasion of Ukraine. The new sanctions block the import of aluminum, copper and nickel into the U.S. and U.K. The sanctions also prohibit the trading of new metal imports on the London Metal Exchange (LME) and Chicago Mercantile Exchange (CME).

The three metals are major exports for Russia and limiting their sale in the West will take a major toll on the country. Commenting on the move, U.S. Treasury Secretary Janet Yellen said, “Our new prohibitions on key metals, in coordination with our partners in the United Kingdom, will continue to target the revenue Russia can earn to continue its brutal war against Ukraine.”

The Markets

The sanctions were designed to mitigate their effects on markets in the U.S. and U.K. – existing stockpiles are allowed to continue trading – while maximizing them in the Russian economy, a major exporter of all three metals. On the LME, for instance, copper mined from Russia makes up 62% of current stockpiles. Still, the drop in supply in global markets is likely to drive prices higher for the already in-demand metals that play a key role in critical technologies and infrastructure.

Opportunities For Investors

As demand for critical minerals like copper, aluminum and nickel continues to grow, global instability is affecting supply. Investing in them could be a solid strategy. However, accessing them can be confusing – and sometimes dangerous territory – for many retail investors as futures markets require a level of sophistication that many lack.

ETFs provide a simpler solution. Many issuers now offer funds that allow investors to access futures markets through their broker as if buying a stock.

Metals are cyclical in nature, with prices rising and falling as supply and demand waxes and wanes.

Teucrium offers the AiLA Long-Short Base Metals Strategy ETF OAIB as a solution. The ETF invests in a selection of critical base metals and adopts a market-neutral strategy, meaning that regardless of the direction of the market, the fund seeks a positive return.

OAIB tracks the AiLA-S022, a sophisticated index with a proven track record. From 2017-2023, the AiLA-S022 saw an annualized return of 12.65%. AiLA uses a systematic approach to achieve this, utilizing proprietary machine-learning technology.

Featured photo by Dominik Vanyi on Unsplash.