meLONDON Oct 27 (Reuters) - The spectre of recession has hung heavy over this year's London Metal Exchange (LME) Week festivities.
The analyst consensus is that Europe's manufacturing sector is already contracting and the United States may well follow.
Demand forecasts have been slashed. The International Lead and Zinc Study Group (ILZSG) now expects global zinc usage to contract by 1.9% this year. At its April meeting it was expecting 1.6% growth.
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The International Nickel Study Group has cut its global demand forecast from 8.6% in May to 4.2%, reflecting a slide in stainless steel production.
Large amounts of aluminium are already turning up in LME warehouses as the supply chain destocks.
The LME Index (.LMEX), a basket of core base metals, has gone from boom to bust in double-quick time, collapsing by 29% from its all-time highs in March.
But this downturn comes with three unusual characteristics which have combined to create a heady cocktail of uncertainty.
RUSSIAN METAL - TAKE IT OR LEAVE IT?
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The status of Russian metal has been a key talking-point at the many seminars and parties this week in London.
Should the LME suspend deliveries of Russian aluminium, copper and nickel or should it maintain its policy of not preempting official sanctions?
Battle-lines are drawn.
German copper producer Aurubis (NAFG.DE) has joined U.S. aluminium producer Alcoa (AA.N) in publicly calling for an LME ban on Russian metal. Norway's Hydro (NHY.OL) wants government sanctions.
European aluminium consumers group FACE wants the European Commission to intervene to prevent any ban, saying it would risk "the destruction of the independent downstream European aluminium industry".
The deadline for responses to the LME's discussion paper is Friday.
There is a lot of metal supply at stake here. Rusal produces almost four million tonnes of aluminium each year.
Nornickel accounts for around 7% of global nickel supply and, critically for the LME, is a major supplier of the Class I metal deliverable against the exchange's contract.
Russia produced 920,000 tonnes of refined copper last year, about 3.5% of the world's total, according to the U.S. Geological Survey.
An LME ban on deliveries of Russian metal would clearly have significant ramifications for both LME and physical market pricing. More government sanctions would make an even harder impact.
