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    Bloomberg: sanctions against the Russian mining industry could shake the global industry

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    Possible sanctions on the Russian mining industry by the London Metal Exchange (LME) will be a shock to the global steel industry, writes Bloomberg columnist Jack Farchi.

    According to him, the exchange has not yet made a decision, but on October 6, official discussions began on the possibility of banning supplies from Russia. Farchi suggests that a decision could be made as early as next month.

    “In practice, this would mean that metal from Russia would no longer be able to be delivered to any warehouses via around the world in the LME network, which store the metal used to supply futures contracts when they expire,” the article notes.

    The author of the article notes that if sanctions are taken, they will become a problem for companies such as the Swiss Glencore Plc., which cooperates with Rusal. In addition, the ban on supplies may cut off the main producers of the resource from the market.

    According to one of Bloomberg’s sources, the mere fact of discussing the ban could provoke a drop in the supply of Norilsk Nickel products to Europe, since it creates uncertainty in the key time of year to negotiate a sale.

    Furthermore, LME sanctions could force Russian companies to agree to sell rough at lower prices.

    Vladimir Potanin, CEO of Norilsk Nickel, said in an interview with RBC in September that the company is considering options for redirecting part of its sales to the east if sanctions against Russia do not allow it to maintain its current sales structure.

    “But this is not our top priority. The priority is to maintain positions in the markets in which we are. So far, according to the results of the first seven months of 2022, we still have: 50% – Europe, about 20% – America, ”Potanin noted.

    Managing director of commodity research at BMO Capital Markets, Colin Hamilton, commenting on the situation, said that “someone somewhere will buy this [Russian] metal at a discount.”

    Situation on the metals market

    London Metal Exchange has banned the placement of certain metals from Russia 1 more April. The sanctions affected, in particular, aluminum, copper and nickel held in LME warehouses in the UK.

    This decision was made after London introduced an additional duty on 35% on imports of certain goods from Russia. Iron, steel, lead, iron ore, copper, aluminum and silver were subject to additional duties.

    “For a metal subject to the rules, there is a significant risk that there will be a discrepancy between the price of the metal traded and the price of the underlying physical metal,” the exchange explained its decision.

    In September, The Wall Street Journal reported on the problems of the steel industry in Europe, which arose due to the energy crisis. According to the WSJ, steel companies in the European Union are forced to reduce or close production. The newspaper referred to a letter sent by the European Association of Non-Ferrous Metals Producers (Eurometaux) to EU leaders.

    The appeal said that zinc reserves in Europe were almost depleted, so the union countries are forced to import metal from China.

    In addition, the WSJ notes that aluminum production in the EU “almost completely disappears.” According to analysts, aluminum processing plants in European countries still produce aluminum, but it is not suitable for all purposes – for example, for the manufacture of brakes or parts for aircraft. , which require significant energy resources for cleavage and the formation of chemical bonds. Alcoa’s aluminum smelter in Spain and several zinc smelters in Italy, France, the Netherlands and Belgium are on the verge of closing due to high energy prices.

    According to Eurometaux experts, About half of the aluminum and zinc capacities of the European Union do not work , and the production of silicon and iron alloys is declining.

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