Nornickel says new Western sanctions raise risk of metals market disruption

Image: Nornickel

US and British sanctions imposed on Russian nickel, copper and aluminum will further increase price volatility and supply uncertainty, Russian metals-producing giant Norilsk Nickel said on Tuesday.

In their latest round of Ukraine-related sanctions, Washington and London on Friday prohibited metal-trading exchanges from accepting new aluminum, copper and nickel produced by Russia and barred the import of the metals into the United States and Britain in order to disrupt Russian export revenue.

The Kremlin on Monday said it considered the sanctions illegal and called them a double-edged sword that would hurt the interests of those imposing them.

“Nornickel regrets this decision as it will further increase price volatility, supply uncertainty and lead to higher premiums, all of which will negatively affect consumers of these metals across the globe,” Nornickel said in a statement.

It said the risk of market disruptions would rise, as liquidity would deteriorate and the cost of financing of critical industrial supply chains would increase.

Russia is a major metals producer. Its share in global production is more than 5% of aluminum, 6% of refined nickel and 4% of copper. US and UK officials hope the latest sanctions will widen the discount for Russian metal not traded on exchanges.

Nornickel intends to remain a “reliable supplier of products” and will continue to fulfil all its contractual obligations, said the company, which is a major supplier of copper and high-grade nickel. It is also the world’s largest producer of palladium.

Russian aluminum producer Rusal, the world’s largest aluminum producer outside China, said on Monday the new sanctions would have no impact on its ability to supply aluminum to world markets.

But Vedomosti newspaper on Tuesday quoted sources as saying that Rusal had asked the authorities for state support for the non-ferrous metals industry and reported risks to its production from the new sanctions.

Some analysts did not expect an immediate supply shock as Nornickel and Rusal sell most of their metals under bilateral contracts and can continue to sell to other non-US or UK markets.

Since February 2022, Nornickel and Rusal have shifted their focus to Asia, whose share in their revenues last year exceeded 50% and 38% respectively. The two companies are not subject to direct Western sanctions but some Western companies are avoiding dealings with them in what Moscow calls “voluntary self-sanctions”.

(By Anastasiya Lyrchikova; Editing by Mark Trevelyan)


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