Text / Modern Logistics News all-media reporter Chang Heshan
On April 22, 2024, it was reported that Russian mining giant Norilsk Nickel Company ("Norilsk Nickel"), the world's largest refined nickel producer, plans to make its first major copper investment in China.
Source: nsenergy
The company's president, Potanen, said it plans to build a copper plant in China through a joint venture with a local company.
Affected by the sanctions imposed by the United Kingdom and the United States, Norilsk Nickel is considering moving some of its production to the direct consumer market, planning to complete the construction of the plant by mid-2027 and ship copper concentrate to China via the Northern Sea Road.
The Russian newspaper Kommersant quoted Potanin as saying that the establishment of copper concentrate smelting capacity in China will make our products closer to the consumption of Tsingshan nickel, and the final product will be sold as a Chinese product, and Chinese goods in China are more difficult to sanction than Russian goods supplied to China.
As early as March 2009, Norilsk Nickel began to expand the Chinese market, and has been in frequent contact with the Ministry of Commerce of China, the Nonferrous Metals Association, and various iron and steel groups to consider building a joint venture to expand its sales in the Chinese market.
Unilateral sanctions
The world's largest refined nickel refinery has seen its production capacity decline
Recently, US-UK sanctions have extended to Russian copper, aluminum, and nickel.
On April 12, the United States and the United Kingdom announced new trading restrictions on Russian copper, aluminum, and nickel, prohibiting the London Metal Exchange and the Chicago Mercantile Exchange from accepting the newly produced Russian metals, and also banning imports of the three metals from Russia to limit Russia's income from the sale of these metals.
In fact, sanctions against the Russian metal sector, Canada started earlier. On April 5, the Canadian government added nine people to its sanctions list against Russia, including Potanin, the president and largest shareholder of Norilsk Nickel, which owns 36% of the company.
Ma Zhongpu, an expert in the metal materials market, told a reporter from Modern Logistics News that the sanctions and decoupling imposed by the United States and Britain and other Western countries on Russia have had a significant impact on Russia's industrial environment. With Russian exports blocked and trading of critical metals restricted, Norilsk Nickel's international trade supply chain has undoubtedly been hit hard.
图源：nornickel
Affected by European and American sanctions, Norilsk nickel industry eased sales pressure by reducing production, with an output of 209,000 tons in 2023, down 1.4% month-on-month.
Some analysts believe that the actual impact of the US and British sanctions on the Norilsk nickel industry is not large, but it has pushed up the market price of the corresponding metal.
On April 12, the copper price on the London Metal Exchange rose as high as $9,590 per tonne, a new high since June 2022. Since the beginning of this year, copper prices have risen by more than 10%, zinc and nickel have increased by more than 5%, aluminum prices have risen by nearly 4%, and tin prices have soared by 26%.
Because of the global supply status of Russian copper, aluminum and nickel, the metal "ban" of Western countries has pushed up the purchase cost of buyers. Without the price reference of the exchange, the bilateral transaction price negotiation between the buyer and the buyer not only causes unnecessary trouble, but also pays higher costs because the seller's market is dominant. Judging from the actual supply and demand of the market, European countries still have a rigid demand for metal raw materials from Russia, and they still have to pay for the high cost brought by the "sanctions".
"Decoupling and chain breaking"
Undermining global supply chain stability
The new sanctions imposed by the United States and the United Kingdom on Russian copper, aluminum and nickel have led to a decline in the production capacity and exports of Norilsk nickel industry, triggering an increase in the price of copper and other metals in the market, and the "Tsingshan Nickel Incident" closely related to it on March 8, 2022 because of the cancellation of Russian nickel trading qualifications is still unforgettable.
Both incidents involve a question – how to build the security and stability of the global resource supply chain.
However, the United States, Britain and other Western countries, for their own selfish purposes, interfere with and undermine the stability of the global resource supply chain, and also concoct mining alliances to engage in so-called "decoupling and chain breaking" with China.
In 2020, the World Bank predicted that global demand for critical minerals such as lithium, copper, nickel, graphite, and rare earth elements would increase by 500% by 2050.
In June 2021, the Biden administration released a supply chain assessment report that the United States has become overly dependent on "foreign and adversary countries" in critical minerals and raw materials, which has posed a threat to national and economic security.
图源：currentbitcoin
As a result, on December 12, 2022, Canada's Minister of Natural Resources Wilkinson announced at the 15th meeting of the Conference of the Parties to the United Nations Convention on Biological Diversity that seven countries led by the United States announced the formation of an alliance of the "Sustainable Critical Minerals Alliance" composed of the United States, Canada, Australia, France, Germany, Japan and the United Kingdom, and plans to implement the same standards for the production and procurement of mineral resources such as lithium, cobalt and nickel in the future.
In fact, six months ago, on June 14, the United States and Canada and other major partner countries established the Partnership for Mineral Security (MSP), which includes Australia, Finland, France, Germany, Japan, South Korea, Sweden, the United Kingdom and the European Commission in addition to the United States and Canada, to strengthen the critical minerals supply chain.
Economist Yu Fenghui told the Modern Logistics News reporter that the mineral product alliance promoted by the United States and Britain and other countries may lead to China facing greater international political pressure and market barriers when obtaining certain strategic minerals (such as lithium, cobalt, nickel, rare earths, etc.), increasing the difficulty and cost of procurement.
If the alliance countries take joint action to restrict exports to China, it will lead to supply disruptions in key links of China's relevant industrial chains, affecting the normal operation of downstream manufacturing industries, especially strategic emerging industries such as new energy and high-tech.
Yu Fenghui believes that the alliance is not limited to the supply of resources, but also extends to technical cooperation, standard setting, etc., further squeezing the international development space of Chinese enterprises in related fields, exacerbating geopolitical tensions, and negatively impacting global economic and trade cooperation.
Qi Kai, an associate professor at the Institute of Globalization and Global Issues at China University of Political Science and Law, said that in an era of high global interdependence, if the United States always holds the concept of "absolute security", "absolute leadership" and "absolute hegemony" for the so-called supply chain, then there may be endless "new hidden dangers" to be discovered.
From the perspective of supply chain security, Yu Fenghui believes that the "Tsingshan Nickel Incident" highlights that when enterprises use futures and other financial derivatives for hedging, if the risk management is improper, they may suffer from the risk of large-scale short squeeze, which will seriously affect the stable operation of the real industry. The international financial market is volatile and ever-changing, and emergencies may lead to violent fluctuations in commodity prices, which are quickly transmitted to the domestic industrial chain, posing a threat to the cost control and profits of enterprises.
Yu Fenghui said that the "Tsingshan nickel incident" revealed the importance of in-depth understanding and risk assessment of upstream resource supply and derivatives counterparties, and that the lack of transparency and controllability may lead to the neglect or underestimation of supply chain risks.
Regarding the so-called "concerns about China's critical metals", the spokesperson of the Chinese Foreign Ministry pointed out that countries with critical mineral resources should play an active role in ensuring the safety and stability of relevant industrial and supply chains, jointly assume the responsibility for the global supply of relevant minerals, and ensure the normal development of relevant economic and trade cooperation.
Yu Fenghui believes that in the face of the challenges of the G7 alliance of the United States and the United Kingdom and the lessons of the "Tsingshan Nickel Incident", China should take comprehensive measures at multiple levels, such as diversifying supply, strengthening endogenous capabilities, improving technological levels, and actively participating in international rule-making and dialogue, so as to ensure the security and stability of the supply chain.
Joint venture
It is good for China's resource security
Norilsk Nickel is one of the largest producers of non-ferrous and precious metals in Russia and one of the world's largest copper producers, with abundant raw material resources. In recent years, Norilsk nickel has accounted for about 18% of the world's nickel production, about 2.5% of copper production, nearly 50% of palladium production and about 13% of platinum production. In the Russian domestic market, Norilsk Nickel Company accounts for about 96% of the country's nickel production, 55% of copper production, more than 90% of platinum group metals and 95% of cobalt production.
图源：nornickel
For Norilsk nickel industry to build a joint venture factory in China, Xu Weihong, chief economist of AVIC Securities, told the modern logistics reporter that this is a major progress after China's Belt and Road Initiative was proposed 10 years ago, and from the economic and trade cooperation between the two countries, it can be viewed from three levels:
First, through the construction of the Belt and Road Initiative, trade between the two countries will be more facilitated, such as the trade facilitation between China and Russia on iron ore, copper and aluminum.
Second, on the basis of trade, the production capacity cooperation between the two sides and the investment in each other's land are a qualitative leap in economic efficiency and production efficiency. The fact that Russian companies have invested in China to complement each other's advantages is obviously a milestone in Sino-Russian cooperation.
The third is currency exchange based on trade and investment, that is, financial cooperation. Whether it is called the internationalization of the renminbi or the multipolarization of the world's currency, it is China's opening up to the outside world at a higher level of internationalization.
Ma Zhongpu, an expert in metal materials and markets, believes that Norilsk Nickel has come to China to build a joint venture factory, transport copper ore to China for processing, and enter the Chinese and international markets to establish industrial chain sales channels, which is a good thing from an economic point of view, and it is necessary to respect the cooperation between the two sides agreed by the government.
Ma Zhongpu said that the transportation of Russian copper ore to China will increase transportation costs, but copper ore is a strategic resource, and Russia has resource and cost advantages, as long as China's environmental protection is controllable, there is no major problem in the operation of the entire supply chain, and the mainland has a great demand for copper ore and copper metal; in addition, Russian enterprises come to China to build joint ventures for production, which is the supply chain to the sales end of the front, direct transportation by rail, and the impact on the cost of enterprises will not be great, but it has enhanced the mainland's ability to guarantee resources. ”