Vladimir Potanin, one of the major shareholders of Nornickel, is reported to be considering a merger proposal from Rusal, one of the world’s great aluminium companies.
Rusal already owns more than 25% of Nornickel.
The combination would certainly create a mining and commodities behemoth with unprecedented power in base metals.
How much these companies are really worth is a bit hard to read, given that American sanctions are distorting the value of everything.
But on the Moscow stock exchange Rusal is capitalised at just under RBLS870bn, or US$14.6bn, while Nornickel, the owner of the great Norilsk metals complex in Siberia, is worth significantly more.
Whether or not tying the two companies together formally would make much of a difference to global metal supplies is a moot point. Rusal, and specifically its controlling shareholder Oleg Deripaska, has long been the object of suspicion from Western regulators, although that hasn’t stopped its influence reaching deep into the heart of Africa.
Norilsk, on the other hand, has tended to stay more focussed on its unique suite of Siberian assets, which account for a considerable portion of the global nickel and platinum group metals supply. Until recently, Norilsk had a smattering of Western directors on its board, and has generally been less prone to getting on the wrong side of salacious European and North American media reports.
None of that PR stuff really matters now there’s a war on.
And if the conflict in Ukraine wasn’t enough, inflation is pushing up operating costs at major mines whilst at the same time putting a downward pressure on demand for product.
Whether or not this merger goes through, Russia will remain a major player in global commodities markets. From the outside looking in, this deal looks like it does two things: it mitigates the impact of US sanctions by creating a bigger, stronger single entity more capable of weathering storms, and it drives economies of scale that should help keep a lid on costs.
All to the good for the Russians, in what’s a trying set of circumstances for them.
Whether it’s likely to make any difference to the Western world’s ability to source and procure metals is a more open question. A combined Rusal-Norilsk might cut more weight in the developing world. But what really counts in this day and age is whether or not you’re friends with the Chinese.