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FAS wants to create a non-ferrous metals exchange in Russia
The Federal Antimonopoly Service (FAS), in the event of a merger between RUSAL and MMC Norilsk Nickel, may oblige the companies to create a non-ferrous metals exchange. Now RUSAL is preparing to close the deal to purchase a blocking stake in Norilsk Nickel from one of its shareholders, the head of Onexim Mikhail Prokhorov, and does not disclose its future plans regarding the nickel giant. However, the antimonopoly department does not rule out that a merger of companies may take place, and therefore they are preparing conditions in advance.“In the event of the merger of RUSAL and Norilsk Nickel, one of the FAS instructions will be the creation of a non-ferrous metals exchange,” said Alexey Ulyanov, head of the industrial control department of the FAS Russia, at the “Metallurgy in the CIS 2008” conference in Moscow yesterday. “There are preconditions that it will happen soon.” In his opinion, it will take from two months to a year to create the exchange.
The possible merger of RUSAL and Norilsk Nickel has been discussed on the market for quite some time, but conversations intensified after RUSAL made an official statement in December last year about the entry into force of an agreement with Mr. Prokhorov to purchase 25% plus one share of Norilsk Nickel. The deal became possible after another shareholder of Norilsk Nickel, the head of Interros, Vladimir Potanin, with whom Mr. Prokhorov has been sharing a joint business in conflict for more than a year, refused to buy out a blocking stake in Norilsk Nickel from his former partner. According to Vremya Novostey, the deal between Onexim and RUSAL could be completed as early as this week, and the FAS has already issued the companies with the appropriate permission, however, apparently fearing that the deal could move forward, it decided to dot all the i’s in advance.
The FAS promoted the idea of creating a Russian non-ferrous metals exchange even before the deal to create the United Company RUSAL, which included RUSAL, SUAL and the alumina assets of Glencore, at the beginning of last year, but it remained in the minds of its creators. “As one of the behavioral conditions for the creation of UC RUSAL, we were actually asked to study the feasibility of creating an exchange in Russia for three years. We are studying this issue,” RUSAL told Vremya Novostey.
Norilsk Nickel also believes that the issue of creating an exchange requires detailed study. “There are global platforms and an established global market; the objectivity of prices is due to the presence of not only sellers, but also buyers. Thus, the equilibrium market price is formed. So far in Russia the volume of metal consumption is relatively small. Therefore, mechanisms must be worked out to attract consumers to this site,” the company told Vremya Novostei.
It is assumed that ideally the new Russian platform will become an analogue of the London Metal Exchange (LME). The antimonopoly agency believes that exchange trading will make it possible to more accurately determine the fair value of the products of monopoly producers.
Analysts, however, are very skeptical about the new FAS initiative. On the one hand, the Russian exchange, of course, will make life easier for metal buyers, says Dmitry Kolomytsyn from Aton, but in Russia there is not yet much demand for non-ferrous metals, as, for example, in China, so its functions are not entirely clear. However, as UBS analyst Alexey Morozov notes, probably the purpose of its creation is simply an attempt to equalize Russian prices with prices on the LME, but in practice they are almost the same.