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Nickel Prices Surge As UK Sanctions Major Russian Miner

Tyler Durden's Photo
by Tyler Durden
Tuesday, Jul 05, 2022 - 07:30 AM

Via OilPrice.com,

  • Nickel prices jumped by 6% following news that the UK government has added Vladimir Potanin, Norisk Nickel’s president, to its list of sanctioned individuals.

  • Potanin, the board chairman for Moscow-based conglomerate Interros,  holds a 35.9% stake in Norilsk Nickel.

  • Norilsk, one of the world’s largest single nickel producers, accounts for approximately 7% of the global supply.

The UK government has added Vladimir Potanin, Norilsk Nickel’s president and chairman of the management board, to its list of sanctioned individuals. The LME nickel price remains in question. A June 29 update notification from HM Treasury’s Office of Financial Sanctions Implementation (OFSI) noted Potanin’s addition. The stated reason was that he would benefit from or support the Russian government by owning or controlling Rosbank.

“Rosbank is carrying on business in the Russian financial services sector, which is a sector of strategic significance to the Government of Russia,” OFSI said in its update. Potanin, the board chairman for Moscow-based conglomerate Interros,  holds a 35.9% stake in Norilsk Nickel. That holding group acquired Rosbank from French investment bank Société Générale back in April.

The LME Reacts to Sanction News and Nickel Price

The market quickly voiced concerns over possible supply issues. According to reports, news of the sanctions caused nickel prices on the London Metal Exchange to jump by 6%. The base metal’s official three-month closing price was $23,158 per metric ton on June 28. According to data from the bourse, this represents a decline of 10.8% from June 21, when prices were $25,949.

The sanctions are part of the “Russian Regulations”. This information falls under the Sanctions and Money Laundering Act of 2018. According to the OFSI documents, these stipulate freezing funds and economic resources belonging to entities “involved in destabilizing Ukraine. It undermines or threatens the territorial integrity, sovereignty, or independence of Ukraine. It’s about obtaining a benefit from or supporting the Government of Russia.”

The asset freeze also prevents any UK citizen or business from dealing with any funds owned, held, or controlled by the named individual. “It also prevents funds or economic resources being provided to or for the benefit of the designated person,” a government statement said. Potanin will also not be able to enter the United Kingdom or remain in the country

A Long List of Bans and Sanctions

Norilsk, one of the world’s largest single nickel producers, accounts for approximately 7% of the global supply. Of course, Nickel’s primary application 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 are also sourced heavily from Norilsk’s production. Back in May, the UK government imposed a 35% duty on all imports of the rare metals sourced from Russia or Belarus.

That same month, the UK froze the assets of London-headquartered Evraz. As a major steel manufacturer, Evraz has steelmaking and mining assets in Russia. The Financial Conduct Authority had already suspended the group’s shares on the London Stock Exchange two months earlier. This was largely due to the government’s addition of Roman Abramovich to its list of sanctioned individuals.

In March, steel and iron imports from Russia and Belarus were subjected to a 35% import duty. The move was the result of denying the two countries “Most Favored Nation” status for hundreds of their exports.

It Remains Unclear How Much Impact the Move Will Have

The LME has still not banned Russian Nickel. It’s just that the stocks from Russia are lower due to concerns over supply and logistics. So, while things might seem tight in Europe for now, there are ample opportunities to source Nickel from other places and producers.

Indonesia, for instance, has been ramping up its nickel production exponentially. This will effect its nickel price. In fact, estimates put the country’s primary production forecast for 2022 at 1.3 million metric tonnes. That’s a 52% increase on the year. Currently, primary nickel demand within Europe is forecasted at 310,000 metric tonnes for the year. This is a significant increase from 2021, when demand was 300,000. Fortunately, the LME does not require high-quality nickel for all of the nickel it pushes through.

Despite the sanctions, Norilsk Nickel will likely turn its attention towards China as a primary end-user. If demand holds up in that market, the company will not get too broken up about Potanin’s inclusion on the U.K.’s list.

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