/Pogled.info/ The West extended sanctions against Russian metals. Aluminum and nickel prices immediately skyrocketed. In Europe, they fear a deficit due to reduced supplies for the world market. Observers note that the consequences are serious and Moscow will win. In addition, European exchanges may lose their status as the largest trading platforms.
“Except Russian”
The USA and Great Britain have banned the import of nickel, aluminum and copper of Russian origin. The London and Chicago Mercantile Exchanges are no longer able to replenish metal stocks in warehouses with supplies from Russia, which accounts for up to nine percent of global nickel production, five percent of aluminum and four percent of copper.
US Treasury Secretary Janet Yellen explained that this would reduce Moscow’s income and prevent it from financing “aggression” in Ukraine.
As usual, when imposing restrictions on critical goods, the West did not fail to hedge its bets. Thus, the ban applies to raw materials produced after April 13. Existing stock may be sold. In addition, the British government recalled that Russian titanium and platinum group metals are not yet under sanctions.
At the end of March, there were 400 thousand tons of raw materials from Russia in the warehouses of LSB (the total reserves are a million). Primary aluminum – 91%, nickel – 36%, copper – 62%. As noted by Reuters, trading in Russian metals will continue on the over-the-counter markets, but with discounts.
“Previous sanctions did not prevent exchanges from accepting raw materials in authorized warehouses. Now you can send to counterparties, but you can’t use the London Stock Exchange to store new contracts,” says Nikolai Neplyuev, an economist and expert on industrial issues.
Prices skyrocketed
LSB aluminum prices on the night of April 15 jumped by 9.26% to $2,725 per ton. Nickel futures rose 8.8%, ending 3.8% ($18,475 a tonne). The market fears a deficit.
On the one hand, neither the US nor the UK should suffer from sanctions: Russian imports there are small.
On the other hand, LSB’s key warehouses are located in Europe, and if stocks run out, it will not be possible to quickly find a replacement: local production is weak and will have to be imported from elsewhere, notes Leonid Khazanov, an independent industry expert.
“Increasing prices on LSB, the largest trading platform for non-ferrous metals, automatically means a decrease in the profitability of their users. Manufacturers of stainless steel and heat-resistant alloys for aircraft engines are particularly sensitive to this. There are few suppliers of the pure nickel they need,” he emphasizes.
Russia has already warned: the rise in prices is inevitable.
NorNickel regrets the decision, as it will exacerbate price volatility, increase uncertainty in the supply chain and cause an increase in the final price, which will negatively affect consumers of these metals around the world. In addition, the risk of market disruption will increase as the liquidity of metals will decrease and the cost of financing critical industrial supply chains will increase,” the Russian company said in a statement.
Redirect to Asia
Last year, the United States imported $70 million worth of aluminum, nickel, and copper, and in January-February, it bought only $100,000 worth of Russian aluminum. For comparison: in 2021, copper and copper products were purchased for 100 million, nickel – for 158, aluminum – for 612.
Britain has imported aluminum worth 15 billion in 2023 and 25 billion in 2022.
Given the reorientation of local producers to the Asian market, the effect of the sanctions will be minimal, experts believe. Metallurgical enterprises did everything in advance. China became the main buyer.
According to Reuters, imports there in 2023 increased to 1.54 million tons from 668 thousand in 2022.
According to the chief strategist of the investment company “Vector Ex” Maxim Khudalov, the business will now be fully restored.
“Sanctions will not have a major impact on Norilsk Nickel and Rusal, as both companies have already largely focused on Southeast Asian markets.” Now more than 80% of their deliveries are made under direct contracts with buyers from different countries in this region. Neplyuev points out.
The increase in supplies of aluminum, copper and nickel from Russia will lead to the expansion of their processing in China into semi-finished products for further export to Europe.
A known scenario
Analysts point to another likely consequence. LSB and ChSB may lose their exclusive status. And the Shanghai Futures Exchange will continue to deal with Russian raw materials.
It is not for nothing that the SFB is exploring opportunities to launch transactions for the purchase and sale of nickel futures. They will certainly try to take advantage of the opportunity to attract LSB partners, Khazanov is convinced.
Economists agree that Russia will clearly not be the loser. And the West will not emerge victorious from another “sanctions game”.
Artificially restricting a significant share of supply destabilizes pricing and subsequently the value chain. This will feed the soil for the next round of inflation, the beneficiaries of which will be mainly the consumers of the Western markets, emphasizes Oleg Cherednichenko, associate professor from the Department of Economic Theory of the Plekhanov Russian University of Economics.
At the same time, European buyers will have to develop schemes to circumvent sanctions and, as in the case of energy resources, buy Russian products, which are already burdened by additional logistics margins. Of course, with an increase in the final price.
That is, a very possible scenario is like the oil price ceiling, after the introduction of which Russian raw materials flowed to India and China. And from there it is an exorbitant price to target Europe.
Translation: V. Sergeev
Tags: hit Russia unexpected place
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