Page 109 - Russia OUTLOOK 2023

The European Commission proposed sanctions on Russia’s mining
industry for 2023 in December, although the details are not clear yet. The
mining industry was largely unsanctioned in 2022, as Russia is too deeply
integrated in the international metals market.

The EC is proposing a potential ban on new investments in the Russian mining
space according to European officials under the as yet unfinished ninth
sanctions package. The restrictions will have a number of exceptions for
"specific products", Reuters notes. For example, so far most of Russia’s
aluminium, nickel, PGM and steel production has been exempted.

One metal of special note, dominated by Russia, is titanium, used in
plane-making. European aerospace giant Airbus intends to divest Russian
titanium supplies within months, Prime reported citing a statement from the
CEO of Airbus Defence & Space, Michael Schoellhorn.

So far titanium supplies have not been directly sanctioned by the West for
Russia’s military invasion of Ukraine. But US plane-maker Boeing previously in
March announced its suspension of purchases of titanium from Russia.

Previously, Boeing was set to deepen its co-operation with VSMPO-Avisma,
Russia's titanium producer. As followed by bne IntelliNews, the US major in
2018 intended to spend $27bn on direct purchases in Russia out to 2038, with
$18bn allocated to titanium purchases.

Until now the international plane-makers have been relying on stockpiles of
titanium, and it remains unclear where they can source more non-Russian
supplies of the metal.

All in all, the ban could be agreed upon by the end of next week, as European
authorities hope. Separately, the new sanctions package might include the
restrictions on three more banks’ transactions, as well as against 180
individuals, and export controls on civilian technologies.

Commodities:

Tighter oil market in 2023
There is still plenty of uncertainty over Russian oil supply given the EU’s ban
on Russian crude oil and refined products. However, we believe that Russian
supply will fall significantly early next year – in the region of 1.8mn bpd y/y in
the first quarter. This supply loss coupled with continued OPEC+ supply cuts
suggests that the oil market will tighten over the course of 2023. US supply
growth will not be able to fill the gap, with US producers showing a lot more
capital discipline. As a result, we expect ICE Brent to average $104/bbl next
year.

109 Russia OUTLOOK 2022 www.intellinews.com