UMMC Faces New Challenges after US Sanctions
The Ural Mining and Metallurgical Company (UMMC) has been added to the US Treasury Department's sanctions list, posing challenges for the major copper producer in Russia. Despite the expectation of such sanctions, the move came as bad news for the company.
UMMC is among Russia's top three copper producers, estimated to produce around 450,000 to 470,000 tons of copper annually, out of the country's total production of 1.1 to 1.2 million tons. The company operates several facilities involved in copper ore extraction and smelting, along with various other metal processing plants.
The company's founders, Iskandar Mahmudov and Andrey Kozitsyn, have seen significant changes in their roles due to the sanctions. Mahmudov ceased to be a controlling beneficiary in March 2022, possibly anticipating US, EU, and UK sanctions. Meanwhile, in July 2022, the European Union imposed sanctions against Andrey Kozitsyn, leading to his departure as the CEO of UMMC. However, no direct restrictions have been placed on UMMC itself, except for limitations on importing copper and zinc to its warehouses, imposed by the London Metal Exchange in September 2022.
The recent US Treasury Department's sanctions also target UMMC's subsidiaries "UralElectromed" and "UMMC-OCM." Interestingly, the sanctions do not extend to the company's foreign assets, including the acquisition of French group Gindre in 2015, which owned copper rolling plants in several countries.
The US sanctions instruct UMMC's partners to cease all business relations with the company and its subsidiaries by October 18 of this year. Failure to comply may lead them to face US sanctions as well. However, while the US market remains inaccessible, UMMC may still continue limited transactions through traders. The European Union, on the other hand, accounts for significant copper exports for UMMC, estimated at 50,000 to 100,000 tons annually. Losing the EU market could be a substantial setback for the company, creating opportunities for competitors like Codelco.
Despite the challenges, China remains a key market for UMMC, where the company may seek to increase copper sales, possibly offering attractive discounts to customers. Additionally, UMMC may explore other Asian markets through traders and with competitive pricing strategies. The company is determined to navigate through the sanctions and find alternative export avenues for its copper production.
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