Nickel prices rise as UK sanctions major Russian miner
The British government has added Vladimir Potanin, chairman and chairman of the board of Norilsk Nickel, to its list of sanctioned individuals. The LME nickel price remains uncertain. A June 29 update notification from the UK Treasury’s Office of Financial Sanctions Implementation (OFSI) noted the addition of Potanin. The reason given was that he would benefit or support the Russian government by owning or controlling Rosbank.
“Rosbank operates in the Russian financial services sector, which is a sector of strategic importance to the Russian government,” the OFSI said in its update. Potanin, chairman of the board of Moscow conglomerate Interros, has a 35.9% stake in Norilsk Nickel. This holding group acquired Rosbank from French investment bank Societe Generale in April.
LME reacts to sanctions news and nickel price
The market was quick to raise concerns about possible supply issues. News of the sanctions caused nickel prices on the London Metal Exchange to jump by 6%, according to reports. The base metal’s official three-month closing price was $23,158 per metric ton on June 28. According to data from the exchange, this represents a decline of 10.8% from June 21, when prices were at $25,949.
Sanctions are part of the “Russian Regulations”. This information falls under the Sanctions and Money Laundering Act 2018. According to the OFSI documents, these stipulate the freezing of funds and economic resources belonging to entities “involved in the destabilization of Ukraine. It compromises or threatens the territorial integrity, sovereignty or independence of Ukraine. It’s about gaining an advantage or supporting the Russian government.
The asset freeze also prevents any UK citizen or business from dealing with funds owned, held or controlled by the named person. “It also prevents funds or economic resources from being provided to or for the benefit of the designated person,” a government statement said. Potanin will also not be able to enter the UK or stay in the country.
A long list of prohibitions and penalties
Norilsk, one of the largest nickel producers in the world, accounts for around 7% of the world’s supply. Of course, the main application of nickel is the production of austenitic stainless steel. However, the metal’s application also extends to batteries, including those designed for electric vehicles. Platinum and palladium also come largely from Norilsk production. Last May, the British government imposed a 35% tariff on all imports of rare metals from Russia or Belarus.
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That same month, the UK froze the assets of London-headquartered Evraz. As a major steel producer, Evraz has steel and mining assets in Russia. The Financial Conduct Authority had already suspended the group’s shares from the London Stock Exchange two months earlier. This was largely due to the government adding Roman Abramovich to its list of sanctioned individuals.
In March, imports of steel and iron from Russia and Belarus were subject to a 35% import duty. The move was the result of denying both countries “most favored nation” status for hundreds of their exports.
It is still unclear what impact the move will have
The LME still hasn’t banned Russian nickel. It’s just that Russian stocks are lower due to supply and logistics concerns. So while things may look tight in Europe at the moment, there are plenty of opportunities to source nickel from other locations and producers.
Indonesia, for example, has increased its nickel production exponentially. This will affect its nickel price. In fact, estimates put the country’s primary production forecast for 2022 at 1.3 million metric tons. This is a 52% increase over the year. Currently, primary nickel demand in Europe is estimated at 310,000 metric tonnes for the year. This is a significant increase from 2021, when demand was 300,000. Luckily, the LME doesn’t need high-grade nickel for all the nickel it passes through.
Despite the sanctions, Norilsk Nickel will likely turn its attention to China as the main end user. If demand continues in this market, the company will not be too disappointed with the inclusion of Potanin on the UK list.
By AG Metal Miner
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