Has the West repeatedly increased its ban on Russia? has the global metal pattern changed?

On Sunday (March 20), Australia announced a ban on the export of alumina and alumina ores, including bauxite, to Russia, triggering a surge in global aluminum prices on Monday.

Following the "demon nickel", there is another "mad aluminum", and the metal once again sweeps the headlines.

However, Russia is not only a big exporter of nickel and aluminium, but also occupies a key position in global trading of other metals, such as palladium, copper, antimony and beryllium.

As Europe and the United States ban Russia more and more day by day, the global metal pattern is shifting. Assuming Russia is out, will we usher in an across-the-board production cut, or will we see other countries take advantage of the situation?

Recently, the epic price of nickel has soared, making investors around the world face up to nickel as a non-ferrous metal for the first time.

Nickel is not only a key player in stainless steel manufacturing, but also plays an important role in the increasingly hot new energy vehicles in recent years. As one of the cathode materials of ternary battery, it plays an irreplaceable role in cost control and improving battery life.

The main sources of nickel are sulphide ores, which are often distributed in Australia, Russia and Canada, and laterite nickel ores, which are commonly found near the equator, such as Indonesia and Brazil.

Nickel in sulphide ores is generally used as a material for smelting high matte, which can be further made into refined nickel and nickel salts. Refined nickel can be involved in downstream stainless steel, alloy, electroplating and battery production, while nickel salts are generally only involved in electroplating and battery production.

Laterite nickel ore can be made into a wide range of products, nickel products on the market can be obtained through the development of laterite nickel ore. As a result, countries with laterite nickel deposits occupy a more active position in nickel trade.

According to the US Geological Survey, in 2019, Russia's nickel reserves were 7.5 million tons, ranking fourth in the world, accounting for 7.9% of the total reserves, followed by Indonesia (23.6%), Australia (22.5%) and Brazil (12.4%).

Russia produces 154000 tonnes of refined nickel in 2020, accounting for 6.4 per cent of the global share, according to the CICC Research report. In terms of exports, Russia's nickel exports are 140000 metal tons, accounting for 5.9% of the world's refined nickel production, ranking first. In 2021, Russian nickel production accounted for 6 per cent of global primary nickel production and 22 per cent of global primary nickel production capacity.

Simply from the data point of view, the gap in Russian nickel can still be made up.

The first is to find a way in the countries with abundant laterite nickel, but the content of nickel in laterite varies greatly, so it is difficult to extract and separate nickel. Take Indonesia as an example, although the mineral capacity is sufficient, but the production capacity can not keep up for a short time.

The second is to increase the production capacity of nickel sulphide mining countries, such as Australia. According to Australian government publications, Australia's refined nickel exports will increase from 140000 tons in 2020 / 21 to 170000 tons in 2022 / 23, a small increase, but a real effort.

The gap created by Russo nickel may change in the long run, but now it is a vertical target, waiting for capital to come on stage.

According to data released on Monday by (INSG), an international nickel research group, there may be a supply shortage of 157100 tons in the global nickel market this year.

The obstacle now is that other countries need to fill in the gap of Russia's exit while meeting the growing demand of the global market. It's a little tricky.

Unlike nickel, aluminum already has a relatively mature and stable global market. Capital wants to stir up trouble, the level of difficulty is a little high. But Australia's ban on Russian exports of alumina is to the point.

From the perspective of the aluminum industry chain, bauxite is the first step in extracting aluminum, mainly in Guinea, Australia, Vietnam, Brazil and Jamaica. These five countries account for 72% of the world's reserves, and the rest are basically just running with them.

Alumina, as the second step of aluminum extraction, is the material for the production of electrolytic aluminum. Russia is the largest producer of electrolytic aluminium after China, producing 3.76 million tons of electrolytic aluminium in 2021, accounting for 5 per cent of global production.

Although the output of electrolytic aluminum is high, Russia's local bauxite can not meet its demand at all, so it can only be solved by importing alumina and bauxite.

In 2021, Rusal has an alumina production capacity of about 9.5 million tons per year, with equity production of 8.3 million tons, accounting for 6.3 per cent of global alumina, of which nearly 20 per cent depends on Australian imports.

For cost reasons, 66 per cent of Rusal's alumina capacity is located outside Russia to reduce freight costs, mainly in Ireland, Jamaica, Ukraine, Guinea and Australia. Among them, the production capacity of alumina in Russia reached 3 million tons, that in Ukraine reached 1.77 million tons, and Australia provided about 1.5 million tons of alumina production capacity.

Ukraine's production capacity is not expected for the time being. Russia accounts for about 9 per cent of imports of alumina from Australia, coupled with the tightening of western sanctions, Australia's Russian aluminum business could be shut down at any time. Taken together, nearly half of Russia's alumina production capacity may be shut down this year, as can European electrolytic aluminum plants that rely on Russian alumina.

To ensure that the supply of aluminum will not be affected, either Russia will find an alternative to Australian alumina or other electrolytic aluminum producers will contribute.

China, as the largest producer of alumina and electrolytic aluminum, seems to offer a solution.

According to SMM data, in February 2022 (28 days), China produced 2.946 million tons of electrolytic aluminum, down 2.35 percent from the same period last year, with an average daily output of 105000 tons, an increase of 1900 tons from the previous month and a decrease of 2500 tons compared with the same period last year. China produced a total of 6.151 million tons of electrolytic aluminum from January to February in 2022, down 3 percent from the same period last year. In February, the supply side of electrolytic aluminum resumed production and the production of new production capacity was accelerated. Among them, electrolytic aluminum in Yunnan area was supported by the government and Southern Electroweb power, and the operating capacity of electrolytic aluminum increased significantly. In February, the scale of resumption of production plus new production in Yunnan reached 740000 tons.

In a word, China's production capacity is catching up, and the only problem is that the production of aluminum is too energy-consuming and polluting, which is likely to conflict with environmental protection policies.

Another problem is the impact of the epidemic, which has hit the global supply chain to varying degrees, coupled with the fact that the United States continues to raise taxes on China's steel industry, including aluminum products, making it more difficult to circulate aluminum.

In other words, supply can be solved, but delivery of "aluminum" cannot.

According to data from the OECD (OECD) in 2020, the metals with higher ratios of Russian exports to global exports that year were beryllium (51.6 per cent), antimony (14.2 per cent) and vanadium (5.1 per cent), while higher output metals were vanadium (9.4 per cent), antimony (8.4 per cent), beryllium (7.5 per cent) and cobalt (5.6 per cent).

Beryllium is mainly used in atomic energy reactor materials, aerospace engineering and other fields, with special military properties, but more than 50% of beryllium resources are supplied by the United States, and at present, only the United States, Russia and China have large-scale complete beryllium industrial systems in the world.

Antimony can be widely used as an alloy in industry, and it also has a place in microelectronics. For example, in the manufacture of AMD graphics cards, antimony is mainly distributed in China, Russia and Bolivia. China's antimony reserves account for 52% of the world's resources, so don't seem to worry too much.

Vanadium is widely used in steel because it can significantly improve the mechanical properties of steel. the ore producing vanadium is mainly vanadium titanium magnetite, which is distributed in Russia, South Africa, China, Australia and the United States.

Cobalt, like nickel, has attracted much attention as a hot material for batteries in recent years. At present, nearly 40% of cobalt consumption is used to make positive electrodes of batteries. According to the U. S. Geological Survey, the world's proven cobalt resources are not rich, mainly distributed in Congo, Australia and Cuba, the three countries account for 68% of the world's total reserves, Russia's proven cobalt reserves are only about 250000 tons, but the meat on mosquito legs is also meat.

Among the other mainstream metals traded, Russia's bulk exports include gold, copper, tin and zinc.

In 2020, Russia's copper production accounted for about 4.5 per cent of the world's copper mining, with exports accounting for 4 per cent; zinc production was 211800 tons, accounting for 1.6 per cent of the world's total; although it has large tin reserves, it ranks second in the world, but the construction conditions are insufficient. Tin production is far from comparable to other countries. Russia's position in the international trade of these three metals is not that important.

But Russia is one of the most important producers of palladium, which accounts for 40% of the world's total, and is widely used in catalytic converters used in automobiles. Once supply is disrupted, people can only use more expensive platinum as an alternative.

If only the above metals are considered, palladium, beryllium and cobalt are probably the most vulnerable to the conflict between Russia and Ukraine, the first two of which cannot be replaced by important suppliers, and the other is that the battery industry is in high demand and the reserves are not enough.

It's just that both cobalt and beryllium deal with the contradiction between supply and demand in a way that affects the prices of downstream products, so it's almost impossible to reproduce the "rise" of nickel and aluminum.

However, if Europe and the United States further tighten sanctions and ban palladium in the future, we may be able to see a third performance of metal prices taking off.