The economic sanctions triggered by the situation in Russia and Ukraine will directly affect the export trade of a series of metals such as aluminum and nickel in Russia.
According to the Shenwan Hongyuan Group Co.Ltd(000166) report, Russia’s export trade volume of aluminum, nickel, palladium and platinum accounts for 12%, 7%, 26% and 4% respectively in the world; The proportion in European market is 16%, 42%, 45% and 36% respectively; The output of magnesium ingots accounts for about 8% of the global output.
The agency pointed out that the situation in Russia and Ukraine has changed, which is expected to have an impact on the global supply of non-ferrous metals such as aluminum, nickel, palladium and platinum, pushing up the prices of related products.
On February 24, the aluminum price on the London Metal Exchange (LME) broke through the high point in 2008, reaching US $3412 / ton, a record high, with the largest increase of 4.75%.
Nickel prices also hit a new high since 2022. On February 24, the highest price of LUNI nickel was about 25400 US dollars / ton, with a maximum increase of 4.01% and an increase of more than 20% during the year.
The geopolitical conflict intensified on February 21. That night, Putin signed a presidential decree recognizing the “people’s Republic of Donetsk” and “people’s Republic of Lugansk” in eastern Ukraine, signed a treaty of friendship and mutual assistance with regional leaders, and sent peacekeeping troops.
On February 22 local time, the US president announced sanctions against two major Russian financial institutions. Subsequently, many countries followed up sanctions against Russia.
On February 24, when delivering an emergency live television speech on the situation in Ukraine, Putin said that he had decided to carry out special military operations in the Donbas region.
The sanctions imposed on Russia by the United States, Europe, Britain and Japan may lead to the recurrence of the situation of aluminum and other metal industries in 2018.
On April 6, 2018, the United States announced sanctions against Rusal. After that, the London Futures Exchange suspended the delivery of Rusal raw aluminum ingots, the CEO of Glencore withdrew from the board of directors of Rusal, and Rio Tinto announced that some contracts related to Rusal were unable to perform due to force majeure. These events caused the international aluminum price to soar by more than 30% in 11 trading days, reaching a seven-year high.
Due to the serious shortage of aluminum, the cost of downstream manufacturing enterprises in the United States soared. After that, the U.S. government had to gradually reduce or even cancel the sanctions against Rusal.
Rusal is one of the largest aluminum producers in the world, with an annual electrolytic aluminum production capacity of more than 4 million tons, accounting for more than 6% of the global electrolytic aluminum production capacity.
According to Russian customs data, from January to November 2021, Russia’s aluminum export volume was 3.1902 million tons, with an export volume of US $6349.6 million, a year-on-year increase of 31% and 66% respectively.
Huatai Securities Co.Ltd(601688) pointed out that in the second half of 2021, the production of wind power and nuclear power in Europe was insufficient, the supply of natural gas was short, energy prices soared for many times, and European aluminum smelters reduced production one after another.
Since 2022, the European energy crisis is still fermenting. At present, about 850000 tons of electrolytic aluminum production capacity has been affected, accounting for about 1.1% of the global production capacity.
Nickel was also affected.
According to the data of Huatai Securities Co.Ltd(601688) , the output of primary nickel in Russia was about 146000 tons in 2021. Among them, the output of refined nickel is about 121000 tons, accounting for about 5% of the global primary nickel.
According to Russian customs data, from January to November 2021, Russia’s nickel export volume was 45100 tons, with an export volume of US $789 million, a year-on-year decrease of 57.41% and 43%.
According to Chinese customs data, China imported 46000 tons of refined nickel from Russia in 2021, accounting for about 18% of China’s Refined Nickel imports, down 11% year-on-year.
According to the interface news reporter, Russian nickel is one of the main delivery products of Shanghai nickel. If the export of Russian refined nickel is affected, it may lead to a shortage of Russian nickel supply in the Chinese market, and then drive up the price of Shanghai nickel.
Chuangyuan futures explained from another perspective that in the past few years, the proportion of Russian nickel exports to Europe and China was about 30% – 40%, and the proportion of exports to the United States was only 5%. If the United States and Europe implement sanctions against Russia, China will become the first choice for Russian nickel export, which will match the relatively strong demand of China’s ternary precursor to a certain extent.
In addition to aluminum and nickel, precious metals such as palladium and gold will benefit.
Among them, palladium is the most prominent among all precious metals. Russian palladium accounts for 26% of global exports.
In addition to the direct impact on metals, the energy supply concerns caused by the Russian Ukrainian reform will also support the prices of high energy consuming products, such as zinc and industrial silicon.
Shenwan Hongyuan Group Co.Ltd(000166) pointed out that Germany’s suspension of certification of “Beixi No. 2” pipeline will trigger concerns about the supply of natural gas in Europe, and the prices of natural gas and electricity are expected to rise.
Europe is a major producer of high energy consuming metals such as electrolytic aluminum, zinc and industrial silicon, accounting for about 11%, 15% and 6% of the total global production capacity. If the European energy problem continues and the power cost of relevant smelting enterprises is high, it will affect the supply of relevant products and push up the price.
