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It’s not only oil that Russia exports to the world. Nickel and palladium exports from Russia’s Norilsk Nickel mining company, are vital to global industry. Alistair MacDonald reports for The Wall Street Journal:
From its base at a former Arctic gulag, Russia’s MMC Norilsk Nickel PJSC digs up a large portion of two metals that are essential to greener transport and computer chips.
So far the U.S. and its allies haven’t sanctioned the company, or its oligarch chief executive, underscoring the dilemma some analysts say governments face in seeking to punish Russia without hurting their own access to key commodities.
The mining company is responsible for about 5% of the world’s annual production of nickel, a key component of electric-vehicle batteries, and some 40% of its palladium, which goes into catalytic converters and semiconductors. Nornickel, as the company is known, also supplies energy transition metals such as cobalt and copper.
The price of those metals has jumped since Russia invaded Ukraine amid concerns that Western sanctions or logistical difficulties stemming from the conflict could choke supplies. On Monday, the price of nickel jumped almost 40% on the London Metals Exchange and is up 93% so far this year. Palladium is up around 73% year to date.
Despite the rally in metals prices, Nornickel’s share price—like that of other Russian commodity companies—has dropped, and is down 17% so far this year. The fall is likely to be more severe, given trading in Moscow listed stocks was suspended several days ago as they began to plummet. On Saturday, Fitch Ratings downgraded Nornickel’s debt to junk, reflecting the tougher environment in Russia and weakened financial flexibility of its commodity companies.
Several Western companies say they are looking to diversify their supply away from Nornickel. That mirrors a trend across several commodities, including oil and steel, as Western buyers steer clear of Russian suppliers amid concerns they could be hit by sanctions or simply have problems getting products out of the country.
A spokesman for Nornickel said the miner is committed to fulfilling its obligations to customers, partners and employees. Chie Executive Vladimir Potanin, who also holds a 31% stake in the company, declined to be interviewed.
Western sanctions in response to the current conflict have so far largely avoided companies that provide the West with oil, gas and other key commodities.
Few companies are as pivotal in large commodity markets as Nornickel, particularly for palladium.
“If we have sanctions and we can’t access that palladium, you have to expect disruption globally,” said Gabriele Randlshofer, managing director of the International Platinum Group Metals Association, a trade group whose members include buyers and suppliers of palladium.
“At the moment all companies are looking at [who supplies them], they have to,” she said.
