Weekly Metals News Digest – April 22-26

Merging Titans: A Closer Look at BHP Group’s Intentions and the Global Metals Market

BHP Group’s Merger Proposal to Anglo American

International mining giant, BHP Group, has proposed a merger with its rival, Anglo American. The proposed deal is valued at approximately $39 billion. BHP Group, with a market valuation of $149 billion, aims to consolidate with Anglo American, valued at $42.6 billion. This merger could lead to significant restructuring within the global base metals market, marking one of the most substantial shifts in the past five years.

Anglo American, which owns the diamond monopoly De Beers, is primarily targeted by BHP for its lucrative copper deposits. In the previous year, BHP Group produced 1.2 million tonnes of copper (in pure metal terms), compared to Anglo American’s 826 thousand tonnes. A merger would potentially elevate their combined global copper market share to 10%. Currently, Anglo American’s board is deliberating over BHP’s proposal with their advisors and has advised shareholders to hold off on any significant decisions regarding company securities until further notice.

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Nornickel’s Strategic Expansion in China

Nornickel, led by President Vladimir Potanin, has announced plans to relocate part of its copper production to China. This move coincides with the decommissioning of the aged Copper Plant in Norilsk, constructed in 1949. Nornickel plans to transship approximately 2 million tonnes of copper concentrate annually via the Northern Sea Route to China, necessitating new terminal constructions, particularly in the port of Dudinka near Norilsk.

The company’s strategy includes the construction of a copper smelter in China by mid-2027, establishment of necessary logistics, and addressing environmental concerns. Meanwhile, at the Norilsk site, modern production facilities are set to be introduced, encompassing everything from copper concentrate drying to 3D printing components for Nornickel’s operations.

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Airbus and the Russian Titanium Dilemma

The Canadian government has permitted Airbus to use Russian titanium in its Canadian facilities, thus ensuring continuity in Airbus’s aircraft production amidst supply chain challenges. Despite Airbus’s intention to cease purchasing Russian titanium, mirroring its competitor Boeing, the European manufacturer had previously engaged significantly with VSMPO-AVISMA, one of the world’s largest titanium producers. The decision by Canada is a result of Airbus’s failure to secure an adequate alternative to VSMPO-AVISMA’s offerings, which neither American nor Asian competitors could match in production capability or product diversity.

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Rusal Seeks Government Relief Amid Sanctions

Rusal, facing new sanctions from the US and UK, has requested the Russian government to eliminate export duties and to purchase aluminium for state reserves. This plea follows a significant drop in aluminium prices and the imposition of stringent sanctions that affect trading on major international exchanges. As Russia’s sole primary aluminium producer, Rusal’s production and export capacities are crucial, and the company’s recent requests reflect urgent economic pressures.

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Nickel Market Outlook

The global nickel market is poised for changes in 2024. Production is expected to increase to 3.554 million tonnes from 3.356 million tonnes in 2023, while consumption is anticipated to rise from 3.193 million tonnes to 3.445 million tonnes. This will result in a decrease in the nickel surplus from 163 thousand tonnes in 2023 to 109 thousand tonnes in 2024. Key factors influencing this market include the demand for stainless steel and fluctuations in the production of car batteries due to subsidy changes and competition.

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Anglo American’s Future Prospects

Despite a significant merger proposal from BHP Group, Anglo American has rejected the offer, deeming it insufficient and risky for its shareholders. The proposal was non-binding, and BHP now has until 22 May to either formalize their intentions or withdraw. Meanwhile, Elliott Management has been actively purchasing Anglo American shares, suggesting potential opposition to the merger or alternative strategies involving other major players in the market.

The developments surrounding Anglo American suggest an intriguing continuation of corporate maneuvers in the global mining and metals landscape.

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