Every year in June, Russia traditionally hosts the St. Petersburg International Economic Forum (SPIEF). This year was no exception: despite the sanctions against Russia, the forum took place and was attended by a large number of delegates from all of its regions.
It discussed not only the prospects of Russia’s economic development, but also concluded agreements on the implementation of investment projects. And, not surprisingly, quite a few of them involved the non-ferrous metals industry.
Alumina
The biggest in terms of capital investment was the agreement between Rusal and the administration of the Leningrad Region to build an alumina refinery. Its capacity would be 4.8 million tons a year, costing about $4.8 billion.
According to Rusal’s plans, the first stage of the future plant, with an annual capacity of 2.4 million tons of alumina, should be operational in 2028, and the second stage in 2032. A deep-water port will be built to supply it with bauxite, capable of receiving large dry-cargo ships from Guinea.
And Rusal desperately needs it, because in 2022 it cut alumina output by 28% to almost 6 million tonnes due to the shutdown of the Nikolayev alumina refinery and the termination of supplies to Queensland Alumina due to a ban by the Australian government. At the same time, its Russian aluminium smelters need 8 million tonnes of alumina a year, and it must source this “lost” alumina from the world market, mainly from China. Once the new plant is up and running, it will supply all of Rusal’s alumina.
It is worthy to note that Rusal has not entered into agreements to build aluminium smelters and therefore they are not among its priorities. Instead three documents have been signed regarding the construction of aluminium smelters. One of them is supposed to be built in the Novgorod Oblast, the second one in the Krasnodar Krai, the third one in the Sverdlovsk Oblast. Their capacities will be 11,500 tons, 72,000 tons and 7,000 tons of aluminium profiles per year respectively.
However, there are three pitfalls. Firstly, the production capacity of aluminium profiles in Russia is 300 thousand tons per year, whereas the consumption is 200-250 thousand tons. So there is no need an extra 90,500 tons – it would only increase competition on the market.
Secondly, it is not clear what equipment will be used given the departed from the Russian market the Italian Danieli and the German SMS Group, the two leading manufacturers of aluminium profile presses.
Thirdly, it is not clear if they have established distribution channels, because only one project in the Sverdlovsk region is being invested in by Rostechcom, a rather large trader, while the rest are unknown players.
Rare
Unlike the aluminium industry, there are no agreements related to other non-ferrous metals industries, apart from one signed by Technoinvest Alliance with the government of Zabaikalsky Krai. It concerns the parameters for Technoinvest Alliance’s construction of a chemical-metallurgical plant in Krasnokamensk, which will process concentrates from the Zashikhinskoye deposit, located in the Irkutsk region and one of Russia’s largest niobium and tantalum reserves.
According to plans of Technoinvest Alliance, the concentrates from Zashikhinskoe deposit will be delivered by rail to the chemical-metallurgical plant, which will process 180 tons of tantalum pentoxide and 2.4 thousand tons of niobium pentoxide.
However, the project could be hampered by its weaknesses: the Zashikhinskoye deposit is located in a remote area and is characterised by difficult conditions. This demands considerable investment in its development, which would amount to at least $0.5 billion. Technoinvest Alliance does not have that kind of money and is forced to look for outside partners. It cannot be ruled out that it will not be able to attract them yet and the project timetable will shift, as it happened many times before.
In a similar situation, TriArk Mining has agreed with the authorities of the Trans-Baikal Territory to build a hydrometallurgical plant in Krasnokamensk to process raw materials from the giant Tomtorskoe deposit, located in Yakutia. Its niobium reserves are much larger than those of Zashikhinskoye, and it also has a lot of rare-earth heavy metals, which are in demand on the Russian and world markets.
And it will be even more difficult to develop it. Tomtor deposit is not only located in a remote area, but also its ores are very difficult to enrich – they will have to be processed using a multistage scheme. Raw materials will have to be transported by truck, river and rail. The project to develop the Tomtor deposit will cost at least $2 billion, and without foreign partners, TriArk Mining is unlikely to achieve tangible results any time soon.
Gold
The St. Petersburg International Economic Forum did not go without interesting statements from top managers of Russian nonferrous metal producers. For example, Mikhail Yurchuk, CEO of Atlas Mining, which belongs to the Ural Mining and Metallurgical Company (UMMC) and integrates enterprises of the former Petropavlovsk Group, stated an interest in the retail gold market, seeing great prospects for work there.
UMMC’s attention to gold is not surprising. To date, UMMC controls Sussumanzoloto and Atlas Mining (which together produced almost 20 tons of gold in 2022) and is a competitor to Polymetal and Polyus. The key buyers of gold in Russia are ordinary citizens; in 2022 they bought about 70 tons, and in 2023 they are expected to buy a record 100 tons of the yellow metal. Therefore, UMMC seeks to strengthen its position in the retail gold market by cooperating with the Moneymatika marketplace and Lighthouse financial ecosystem.
UGMK is benefiting here from amendments to legislation, which came into force this year allowing individuals to buy bullion without paying value added tax directly from refineries, and the latter can be expected to enter the market with offers to sell to all comers. In other words, UGMK may order processing of raw materials at one of them and then sell pure metal to Russia through the refineries or sell it on its own.
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