U.S. metal buyers were undaunted by Russia's Feb. 24 invasion of Ukraine, ramping up their Russian imports by 20.3% in the first quarter of 2022 compared to a year earlier, according to data from Panjiva, the supply chain research unit of S&P Global Market Intelligence.

Buyers are lacking any alternative sources of supply in many cases, and appear to be making pragmatic choices to continue sourcing critical metals such as palladium and nickel from Russia, according to analysts. Despite accounting for over a month of post-invasion data, U.S. imports of select Russian metals increased to 973,000 tonnes in the first quarter of 2022 from 809,000 tonnes in the prior-year period, according to Panjiva.

On the other hand, U.S. imports of select Russian minerals dropped 25.5% to 6.2 million tonnes in the first quarter from 8.3 Mt a year earlier. The category includes products such as cement and salts as well as energy products such as oil, natural gas and coal.

Russian imports vary widely from quarter to quarter, so it is unclear whether the decrease was due to the invasion of Ukraine, though the U.S. banned the import of Russian crude, natural gas and coal on March 8.

The U.S., EU and other allies have not directly targeted key Russian metals with sanctions, preferring instead to focus on Russian energy and finances. Companies have had to make individual decisions about whether to continue buying Russian metals. In some cases, European and U.S. metal companies have said they will try to avoid Russian purchases and instead rely on ex-Russia alternatives. In other cases, trade continues relatively unaffected.

"Russian trade and production has seen relatively limited disruption. The disruption we've seen has come from some self-sanctioning by companies. But the metal's still coming out," said Tom Mulqueen, head of research at London-headquartered Amalgamated Metal Trading Ltd., a metal derivatives broker and dealer.

The emerging picture of U.S. imports of Russian metal since the end of the first quarter appears to show U.S. companies have been buying up Russian metals, though the Panjiva data is not yet complete and the picture may change as second-quarter data becomes available.

Metals buyers are split on what to do. For example, U.S. steelmaker Steel Dynamics Inc. ended purchases of Russian pig iron, a steelmaking product, saying it would rely on Brazilian and Indian sources, according to a May 2 report by S&P Global Commodity Insights. Meanwhile, another U.S.-based buyer booked a pig iron delivery in late April, the first since mid-March.

And for other metals such as palladium, trade flows continue largely uninterrupted, said CPM Group Managing Partner Jeffrey Christian. Palladium is a platinum group metal, or PGM, that is critical in the catalytic converters that remove pollution from vehicle exhaust.

"There has been some issues in terms of rerouting payments, but there hasn't been a major disruption on the flow of metal," said Christian, referring to palladium and platinum.

Russia is a dominant producer of palladium and accounted for over 40% of global production in 2020. Given global dependence on Russia for the crucial automotive metal, analysts said they doubted any new sanctions would target PGMs directly.

"The auto industry has so many problems right now that I don't think there's any interest on the part of governments to try to do things that would cause further pain and problems for their industries," Christian said. "Similarly, we haven't seen the Russian government say, 'Hey, we're going to cut off your PGMs.' They desperately need the foreign exchange earnings."

The Alliance for Automotive Innovation, a trade association of large automakers with U.S. operations, told Commodity Insights it did not track how much Russian metal is used by its members.

For some traders, metal market concerns appear to have flipped from supply disruption, stemming from sanctions and changing trade dynamics, to demand destruction due to higher energy prices and China's sluggish return from stringent COVID-19 restrictions. After the invasion of Ukraine, prices for some metals skyrocketed over disruption fears. Such concerns have waned, with worries over inflation and other economic headwinds getting more attention, Mulqueen said.

"That's more of a threat ... if Russia decides to block energy flows," Mulqueen said, noting higher energy prices would drive up inflation and the cost of living for consumers. In turn this could hurt demand for metal-intensive products. "The question now is, is the pace and the strength of China's rebound from its period of severe COVID-19 restrictions going to be enough to outweigh the broader global economic headwinds and the slowdown in economies more broadly?"

Panjiva is the supply chain research unit of S&P Global Market Intelligence, a division of S&P Global Inc. S&P Global Commodity Insights produces content for distribution on S&P Capital IQ Pro.