IN DEPTH: Sanctions on Russia move closer to metal companies

Sanctions imposed by the USA on Russian companies and individuals have moved closer to major metal producers including Norilsk Nickel.

Sanctions imposed by the USA on Russian companies and individuals have moved closer to major metal producers including Norilsk Nickel.

Norilsk director Sergey Chemezov is among the individuals blocked by the US Treasury Department.

Chemezov, ceo of Rostec Corp, is a non-executive director at MMC Norilsk Nickel, the world’s largest nickel producer, and a major supplier of cobalt.

Chemezov is also the chairman of the board of directors at ferro-titanium producer VSMPO-AVISMA.

The latest measures, announced by the US treasury on Monday, froze the assets of seven Russian individuals and 17 companies associated with them, and prohibited any US dealings with them.

All targets were identified as being closely linked to Russian president Vladimir Putin.

It is unclear at this stage how or whether the news will affect the operations of Norilsk or Russia’s VSMPO-Avisma Corp.

Norilsk and VSMPO, which were not themselves named on the list, did not immediately respond to requests for comment.

Norilsk said last month that it did not expect further sanctions against Russia, but that it was making preparations in case they did materialise.

Norilsk Nickel ceo Vladimir Potanin recently dismissed suggestions that supplies of metal will be disrupted by sanctions against the country over the crisis in Ukraine.

Norilsk continues to sign long-term supply contracts with European clients and to maintain relations with customers in the USA, Potanin was quoted as saying.

The mining company has no problems arranging financing and this month agreed to $750 million of loans from a group of international lenders, he added.

While the company plans to increase shipments to China, this has nothing to do with the Ukraine crisis, Potanin reportedly said.

Rostec, which itself has also not been sanctioned, is a state-owned holding company formed around arms exporter Rosoboronexport.

Rostec stated that the sanctions against Chemezov will not affect its business.

“Imposing targeted sanctions on Sergey Chemezov will not affect Rostec’s activities. The introduced restrictions will not prevent him from performing his duties as Rostec ceo, nor will they affect the operations of the companies in which Sergey Chemezov is a member of [the] board of directors,” it said.

“The new sanctions imposed on a number of Russian companies and individuals are a regretful move since such decisions impede fruitful co-operation between the two countries’ industrial corporations aimed at developing joint projects of strategic global importance,” it added.

Last month, Gennady Timchenko, co-founder of energy and metal trader Gunvor, sold his stake in the company shortly before he was placed on a previous list of sanctioned individuals by the US treasury department, the company said.

The news comes after weeks of concern across the non-ferrous industry about trade relations between the countries.

Boeing, for example, said on Friday that it is prepared for the worst-case scenario that political events in eastern Europe could bring a disruption of its titanium supply chain.

VSMPO is one of three titanium suppliers to Boeing’s commercial airliner programmes under the Chicago-based company’s system of long-term supply agreements.

London Metal Exchange nickel prices have, meanwhile, continued to climb this week, as the prospect of additional US and EU sanctions on Russia raised supply concerns.

The alloying metal, which started 2014 at about $14,000, basis three months, settled at $18,580/585 per tonne yesterday.

The threat of additional sanctions on Russia since the country’s military entered Ukraine has contributed to the recent rally in nickel prices, which is largely due to Indonesia’s ore export ban.

Concerns about supplies from Russia could add fuel to the rally, Bank of America said last week, as it forecast a high of $25,000 per tonne over the next 12 months.

“Possible sanctions on Russia, which supplies 12% of global nickel production, have recently accelerated price increases,” the bank said.

Concern has grown across the ferro-titanium and tungsten markets.

A trader told Metal Bulletin earlier this week that sanctions imposed by the USA on Russia over the Ukraine crisis could affect the supply of tungsten concentrates in Europe.

And reports last month that western banks in commodities trading were tightening up their payment procedures for steel and grain from Russia were described as potentially “very worrying” for the ferro-alloys market, and especially ferro-titanium.

Trade volumes
The effects of any US and EU sanctions on the non-ferrous metals trade with Russia could be significant, based on the volumes of metals traded, Metal Bulletin revealed last month.

Among the materials traded in large volumes is aluminium. Last year, the USA imported unwrought aluminium worth $432.92 million from Russia, and aluminium and related articles valued at $538.75 million. It exported the same products to Russia, generating $364,875 and $9.20 million in receipts, respectively.

During the same year, Russian titanium and related articles worth $168.38 million entered the USA, and the USA exported $12.29 million of these products to Russia.

The USA also imported ferro-alloys ($221.89 million); unwrought nickel ($155.03 million); and nickel and related articles ($161.11 million) from Russia in 2013.

In the same year, the USA exported unwrought nickel ($341,619) and nickel and articles ($4.95 million) to Russia.

Fleur Ritzema
Twitter: FleurRitzema_MB

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