The UK government has added Vladimir Potanin, the chairman and chairman of the management board of Norilsk Nickel, to its list of sanctioned persons. LME nickel prices remain in question. An update notification from HM Treasury’s Office of Financial Sanctions Implementation (OFSI) on 29 June noted Potanin’s inclusion. The stated reason is that they benefit from or are supported by the Russian government by owning or controlling Rosebank.
“Rosbank conducts business in the Russian financial services sector, an area of strategic importance for the Russian government,” OFSI said in its update. Potanin, chairman of the board of Moscow-based conglomerate Interros, owns a 35.9% stake in Norilsk Nickel. That holding group acquired Rosebank from French investment bank Société Générale in April.
LME reacts to sanction news and nickel price
The market quickly expressed concern about possible supply problems. News of the sanctions reportedly caused nickel prices to jump 6% on the London Metal Exchange. The base metal’s official three-month closing price on June 28 was $23,158 per metric ton. According to bourse data, this represents a 10.8% decline from June 21, when prices were at $25,949.
The sanctions are part of the “Russian Rules”. This information comes under the Sanctions and Money Laundering Act, 2018. According to the OFSI documents, “freezing funds and economic resources belonging to entities engaged in destabilizing Ukraine. It undermines or threatens the territorial integrity, sovereignty or independence of Ukraine. It benefits from or is supported by the Russian government.”
An asset freeze prevents any UK citizen or business from dealing with any funds owned, held or controlled by a named person. “It prevents the provision of funds or financial resources to or for the benefit of a designated person,” a government statement said. Potanin will not be able to enter or remain in the United Kingdom
A long list of prohibitions and restrictions
One of the world’s largest single nickel producers, Norilsk accounts for approximately 7% of global supply. Of course, the primary application of nickel is the production of austenitic stainless steel. However, the metal’s application extends to batteries as well, including batteries designed for electric vehicles. Platinum and palladium are also heavily sourced from Norilsk production. In May, the UK government imposed a 35% tariff on all imports of rare metals sourced from Russia or Belarus.
RELATED: Oil markets may face a doomsday scenario this week
The same month, the UK froze the assets of London-headquartered Evraz. As a major steelmaker, Evraz owns steelmaking and mining assets in Russia. The Financial Conduct Authority had already suspended the group’s shares on the London Stock Exchange two months ago. This was largely because the government added Roman Abramovich to its list of approved persons.
In March, steel and iron imports from Russia and Belarus were subject to a 35% import tariff. The move comes as a result of the denial of “most favored nation” status to hundreds of exports from the two countries.
It’s unclear how much impact the move will have
The LME has not yet banned Russian nickel. Stocks from Russia were lower due to concerns over supply and logistics. So, while things look tight in Europe for now, there are plenty of opportunities to source nickel from other locations and producers.
For example, Indonesia is increasing its nickel production exponentially. This affects its nickel price. In fact, estimates put the country’s preliminary production forecast for 2022 at 1.3 million metric tons. That’s a 52% year-on-year increase. Currently, primary nickel demand within Europe is forecast at 310,000 metric tons per year. This is a significant increase from 2021 when the demand was 300,000. Fortunately, the LME doesn’t need high-quality nickel for all the nickel it pushes.
Despite the sanctions, Norilsk Nickel will turn its attention to China as the primary end user. If there is demand in that market, the company won’t be too broken up about Potanin’s addition to the UK list.
By AG Metal Miner
More top reads from Oilprice.com: