Russian metals: another headache for manufacturers

All the metals of which Rus­sia is one of the main export­ers, which is a rel­at­ively long list. It is dif­fi­cult to rank their import­ance, although for some, Russia’s weight in the world mar­ket is so great that they will be dif­fi­cult to replace in the short term. This is par­tic­u­larly true of pal­la­di­um, a rare met­al that is as use­ful to the auto­mot­ive sec­tor for cata­lyt­ic con­vert­ers as it is to the pro­duc­tion of semi­con­duct­ors and con­sumer elec­tron­ics. Rus­sia is a major export­er of pal­la­di­um, account­ing for 37% of glob­al pro­duc­tion in 2021.

How­ever, Rus­sia is a vast coun­try, rich in raw mater­i­als, so the diversity of metals present on its ter­rit­ory gives it an import­ant place in a num­ber of sec­tors, although it is not a lead­er in all of them. Rus­si­an nick­el, for example, accounts for 9.2% of world pro­duc­tion in 2021. The Rus­si­an com­pany Nor­nick­el is already one of the world’s largest pro­du­cers of Class I nick­el, which is the only met­al suit­able for the pro­duc­tion of nick­el sulph­ates used in bat­tery manufacture.

The oth­er metals, whose weight in Rus­si­an pro­duc­tion in the world is undeni­able, are: titani­um (13% mar­ket share), plat­in­um (10.5%), alu­mini­um (5.4%), cop­per (4%), refined cop­per (3.5%) and cobalt (4.4%). The reas­on it is impossible to say which of these metals will have the greatest impact on world trade is that they are each import­ant in their own right. Rus­sia, for example, accounts for only 4.4% of cobalt pro­duc­tion, but des­pite this seem­ingly small share, it makes Rus­sia the world’s second largest pro­du­cer of the met­al – a mar­ket dom­in­ated by the Demo­crat­ic Repub­lic of Congo with around 70% of glob­al production. 

The metals men­tioned are use­ful for a mul­ti­tude of sec­tors. The three most import­ant sec­tors are the auto­mot­ive, aerospace and semi­con­duct­or indus­tries. The auto­mot­ive sec­tor is likely to suf­fer the most as it requires many dif­fer­ent metals. For example, alu­mini­um, cop­per, plat­in­um, and pal­la­di­um are all use­ful in the man­u­fac­ture of thermally pro­pelled cars, espe­cially for cata­lyt­ic con­vert­ers. For elec­tric vehicles, cobalt and nick­el are essen­tial for bat­ter­ies. Already hampered by the short­age of elec­tron­ic chips since Septem­ber 2021, the Ger­man auto­mot­ive sec­tor has already sus­pen­ded pro­duc­tion lines due to a sup­ply prob­lem with its sub­con­tract­ors in Ukraine and the situ­ation could get worse. 

The aerospace industry is also depend­ent on Rus­si­an metals, par­tic­u­larly titani­um sponge. The main sup­pli­er of the main aero­naut­ic­al groups is the Rus­si­an com­pany VSMPO-Avisma (about 30% of the world titani­um mar­ket), only Boe­ing has decided to stop its resup­plies for the moment. This com­pany sup­plies around 50% of the world’s aero­naut­ics imports and slightly less for French play­ers. In this sec­tor, man­u­fac­tur­ers have built up stocks as a pre­cau­tion­ary meas­ure, enabling them to man­age a short-term short­age problem.

As for semi-con­duct­ors, their pro­duc­tion requires two main resources, pal­la­di­um and neon gas, the lat­ter being pro­duced at 50% in Ukraine. The two main com­pan­ies, Ingas and Cryo­in, have already closed their sites. So, we can expect great dif­fi­culties for this sector.

At the moment there are no sanc­tions in place for the Rus­si­an min­er­als mar­ket. But oth­er sanc­tions are affect­ing the mar­ket: the logist­ics for their deliv­ery are dis­rup­ted, and the sus­pen­sion of the SWIFT sys­tem for many banks is slow­ing down trade. These dis­rup­tions are hav­ing an impact on prices. Nick­el has under­gone a very impress­ive vari­ation. In a few days, its price per tonne rose from $25,000 to $50,000, before reach­ing $100,000 a few days later, before a sus­pen­sion of prices, then a return to around $50,000 per tonne and a decrease to around $30,000 per tonne on 21st March

Moreover, this war is tak­ing place in mar­kets that are already extremely tight. Between 2020 and 2021, met­al prices jumped by 45% on aver­age (all metals com­bined), due to an extremely strong eco­nom­ic recov­ery fol­low­ing the cov­id 19 pan­dem­ic in a con­text of sup­ply-side ten­sions. Today, there is still no short­age, and price increases are mainly explained by play­ers’ expect­a­tions and geo­pol­it­ic­al risk premi­ums. The fear of new sanc­tions also plays a role in this price variation.

It all depends on Rus­si­a’s weight in world pro­duc­tion of these metals. For pal­la­di­um (37%), it seems com­plic­ated to replace it in the short term, even if South Africa remains the world’s lead­ing pro­du­cer of this resource (40%). What is cer­tain is that every­one is look­ing for new sup­pli­ers. Many coun­tries, such as Canada and Aus­tralia, for example, offer as wide a diversity of metals as Rus­sia. How­ever, for some spe­cif­ic metals there may be issues of short-term availability.

China has a sig­ni­fic­ant weight in titani­um exports, the Demo­crat­ic Repub­lic of Congo dom­in­ates the cobalt mar­ket, and Chile gives us access to cop­per. So, there is no short­age of sup­pli­ers, but tak­ing Rus­sia out of the equa­tion will inev­it­ably reduce sup­ply, while demand is cur­rently unabated.

Accord­ing to the World Bank, exports of ores and metals will account for around 8.5% of Rus­si­a’s expor­ted goods in 2020 (6% in 2019), while those of hydro­car­bons will account for over 42% in 2020 (52% in 2019). Metals are there­fore much less stra­tegic for Rus­sia than hydrocarbons.

Interview by Pablo Andres