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US and UK launch crackdown on Russian metals trade

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US and UK launch crackdown on Russian metals trade

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The US and the UK have launched a crackdown on trades in Russian metals, in a move designed to limit Moscow’s export revenue and restrict its ability to fund the war in Ukraine.

The action, announced by the two countries on Friday, marks an aggressive effort by the allies to damage Russia’s income — but could disrupt trading at exchanges including the London Metal Exchange and Chicago Mercantile Exchange.

“Our new prohibitions on key metals, in co-ordination with our partners in the United Kingdom, will continue to target the revenue Russia can earn to continue its brutal war against Ukraine,” said Janet Yellen, the US Treasury secretary.

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She added that the US and UK were “taking this action in a targeted and responsible manner” in order to protect “our partners and allies from unwanted spillover effects”.

The action will affect trade in aluminium, nickel and copper. Officials said Russia had made $40bn from sales of the metals over the past two years, while it has been fighting in Ukraine.

The US and its allies had been wary of sanctioning Russia’s metals sector at the start of the full-blown invasion of Ukraine in 2022, fearing disruption to global commodity markets.

The move against Russian metals follows the G7’s campaign to curb Moscow’s revenues from crude and petroleum exports, including through a price cap on seaborne oil trades involving western shipping servicers.

It includes a ban on imports of Russian-origin metals into the US. It also prohibits the provision of warranting services for the metals and bans services to acquire the metals as part of the physical settlement of a derivative contract.

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The LME and CME will not be able to trade any new Russian aluminium, copper or nickel.

“We are confident that Russian origin metals will not find their way on to these exchange,” a US Treasury official said. Trades carried out under bilateral contracts will be unaffected by the move by the US and UK.

Russia supplies about 6 per cent of the world’s aluminium, 5 per cent of nickel and 4 per cent of copper, according to CRU Group, a consultancy.

The US and UK have placed sanctions on several Russian metals producers already but the move on Friday is the first time that it has placed a blanket ban on certain Russian minerals trading on the world’s largest metals exchanges.

The earlier resistance to a Russian metal ban stemmed from fears of new disruption to European industry and the possibility that Moscow could retaliate by cutting off supplies of palladium, which is crucial to the region’s car industry.

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Large stockpiles of Russian metals have been building up in LME warehouses, creating concerns that the surplus could distort the market.

For example, more than 90 per cent of aluminium inventories at LME sites are Russian, according to the exchange’s latest data. These existing inventories would not be affected by sanctions in order to “minimise the risk to market stability”, the two countries said.

Because of such concerns, the LME, the world’s largest marketplace for metals, had reviewed banning Russian metal in 2022 but said that it would ultimately be guided by government sanctions.

Officials claim the measures will not raise the price of the metals affected by the ban.

“We understand from our consultations with a lot of market participants in the industry that their view is essentially that a lot of these [metals] are in surplus,” a US Treasury official said, adding that they did not expect the actions to affect US consumers or producers.

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The LME said in a statement that it would issue guidance to the market by 11am on Sunday on how the UK legislation affects the position of Russian metals on the exchange.

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Video: Severe Storms and Tornadoes Cause Destruction in Several States

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Video: Severe Storms and Tornadoes Cause Destruction in Several States

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Severe Storms and Tornadoes Cause Destruction in Several States

Severe weather hit several parts of the United States over the weekend, killing more than 20 people and leaving hundreds of thousands without power.

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Persuading Europeans to work more hours misses the point

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Persuading Europeans to work more hours misses the point

Europeans are spending less time at work, and governments would like them to get back to the grindstone. That is the thrust of measures German, Dutch and British ministers have been examining to persuade part-timers to take on more hours, and full-timers to embrace overtime.

But the evidence suggests it will be an uphill battle — and that authorities worrying about a shrinking workforce would do better to help people who might otherwise not want a job at all to work a little.

Rising prosperity is the main reason the working week has shortened over time, as higher productivity and wages have allowed people to afford more leisure. In Germany, for example, it has roughly halved between 1870 and 2000. Across the OECD, people are working about 50 fewer hours each year on average than in 2010, at 1,752.

Average hours have fallen more in recent years because the mix of people in employment has changed, with more young people studying, more mothers working, older people phasing their retirement and flexible service sector jobs replacing roles in the long-hours manufacturing industry.

The latest post-pandemic drop in European working hours is more of a puzzle. The European Central Bank estimated that at the end of 2023, Eurozone employees were on average working five hours less per quarter than before 2020 — equivalent to the loss of 2mn full-time workers.

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There has been a similar shift in the UK, where average weekly hours are 20 minutes shorter than in 2019 at the end of 2022. The Office for National Statistics says this was driven by lower full-time hours among prime-age men and was equivalent to having 310,000 fewer people in employment.

The trend appears to be a European one — there has been no such recent change seen in the US, which simply laid people off during the pandemic rather than putting them on furlough.

One explanation is that employers have been “hoarding” labour — keeping staff on in slack periods while cutting hours, because they are worried they will not be able to hire easily when demand picks up. The ECB thinks this has been a factor, along with a rise in sick leave and rapid growth in public sector jobs.

But Megan Greene, a BoE policymaker, said earlier this month that while there was some evidence of labour hoarding, it was also “plausible that . . . workers may just want a better work-life balance”.

Researchers at the IMF who examined the puzzle reached a similar conclusion. They said the post-Covid drop in working hours was in fact an extension of the long-term trend seen over the past 20 years, which reflected workers’ preferences — with young people and fathers of young children driving the decline. The biggest change was in countries where incomes were catching up with richer neighbours.

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Some economists, however, believe the experience of lockdowns has made people more willing to trade pay for a less pressured lifestyle, and more able to walk away from jobs with antisocial hours.

“A lot of people started to pay more attention to their health,” said one Frankfurt-based economist, noting that Germany, with one of the sharpest drops in working hours, suffered from high rates of depression and other mental health conditions, along with the UK.

Spain has traditionally been at the other extreme. It has some of the longest working hours in Europe — combined with a long lunch break that means many employees cannot clock off till late in the evening, with family life, leisure and sleep patterns all suffering as a result.  

But even here, habits are changing. Ignacio de la Torre, chief economist at Madrid-based investment bank Arcano Partners, thinks Spanish bars and restaurants have struggled to fill vacancies since the pandemic because former waiters have begun training for better jobs.

In many countries, unions have made shorter hours a focus of collective bargaining, and some employers are experimenting with offering four-day weeks — or more flexible working patterns — as a way of attracting staff.

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The shift in habits is a challenge for European policymakers. Since productivity growth has been weak, they fear that shorter hours will exacerbate labour shortages, fuel inflationary pressures, hold back growth and make it harder to fund welfare systems.

Unless productivity growth improves, de la Torre argues, the only way to boost economic growth is to bring more people into the workforce, embrace immigration or work longer. It is unrealistic to earn the same while working less: the outcome would be “a lower salary at the end of the month”.

But Anna Ginès i Fabrellas, director of the Labor Studies Institute at the Esade law school, cites evidence that young people are willing to accept this trade-off, valuing free time “when they assess the quality of a job”.

Some policymakers think shorter hours and greater wellbeing should be the goal. Spain’s minister of labour, Yolanda Díaz, caused uproar earlier this year by suggesting restaurants should no longer open into the small hours, and the governing coalition has pledged gradual cuts to the legal maximum working week.

The IMF’s researchers made a more pragmatic argument.

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Governments can and should do more to help people who want longer hours, they said, including supporting retraining, job-hunting and childcare, as well as promoting flexible work and removing perverse incentives in tax and benefit systems.

This will have only a small effect, the IMF estimates. Some policies will simply “reshuffle hours” between mothers and fathers. But in general, most people will want to work slightly less provided their living standards advance. That means there’s a limit to what policymakers can do. 

A more realistic goal, the IMF reckons, is to raise the total number of hours worked across the economy, not least through better parental leave policies that could bring more people into work in the first place. Recent trends in the EU are promising: participation in the workforce has risen since 2020.

This feels like the better approach. If employers offer better part-time and flexible roles, people who might otherwise stay outside the labour force entirely might at least work a little — and be happier for it. That would be more productive for governments than pushing against the tide.

delphine.strauss@ft.com

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After severe weather across the South, East Coast braces for potential flooding, tornadoes

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After severe weather across the South, East Coast braces for potential flooding, tornadoes

A man looks at a damaged car after a tornado hit the day before, Sunday, May 26, 2024, in Valley View, Texas. Powerful storms left a wide trail of destruction Sunday across Texas, Oklahoma and Arkansas after obliterating homes and destroying a truck stop where drivers took shelter during the latest deadly weather to strike the central U.S.

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Julio Cortez/AP

A large swath of the eastern U.S. was bracing for severe weather as the Memorial Day weekend came to a close. Deadly storms over the long weekend also knocked out power to hundreds of thousands across the South and disrupted holiday travel at busy airports in the northeast.

Severe storms were expected to stretch from Alabama to upstate New York on Monday evening, according to the National Weather Service. Forecasters said the storms could lead to intense rainfall in the Northeast and Mid-Atlantic, with flash flooding possible. Hail, heavy winds and tornadoes were also possible from northeast Maryland to the Catskill Mountains of New York, according to the NWS.

The threat of severe weather Monday followed a string of powerful and deadly storms that swept through the South and parts of the Midwest over the holiday weekend. At least 23 people were killed in Texas, Oklahoma, Arkansas, Alabama and Kentucky as a result of severe weather.

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Earlier in the week, a deadly tornado also hit Iowa.

In a news conference Monday, Kentucky Gov. Andy Beshear said four people were killed in four different counties after storms ripped through most of the state Sunday. Later Monday, Beshear confirmed a fifth storm-related death.

The tiny southwestern Kentucky community of Charleston took a direct hit from a tornado, officials said.

Beshear said the twister appeared to have been on the ground for 40 miles.

“It could have been much worse,” Beshear said of this weekend’s storms. “The people of Kentucky are very weather aware with everything we’ve been through.”

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To the east of Charleston, parts of Hopkins County, Kentucky, also saw damage Sunday night. Western Kentucky, including a number of communities in Hopkins County, endured a series of devastating tornadoes in 2021 that killed 81 people.

“There were a lot of people that were just getting their lives put back together and then this,” Hopkins County emergency management director Nick Bailey was quoted by The Associated Press as saying. “Almost the same spot, the same houses and everything.”

The website Poweroutage.us reported hundreds of thousands without power on Monday. More than 120,000 customers in Kentucky were without power as of 5:30 p.m. ET, according to the website. Data showed Arkansas and West Virginia each had more than 40,000 customers without electricity.

The White House said the Federal Emergency Management Agency was on the ground conducting damage assessments with state and local authorities. President Biden has directed federal agencies to provide support as needed.

Holiday travel had also been disrupted as a result of the weekend storms.

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According to the flight-tracking website Flight Aware, more than 400 flights in the U.S. had been canceled as of 5:30 p.m. Monday — and another 5,200-plus flights had been delayed. New York’s LaGuardia Airport and Newark Liberty Airport in New Jersey were most affected by delays and cancellations.

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