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Norilsk Sees Low Nickel Prices Cutting World Output
Oct 16,2012 15:18CST
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Russia's Norilsk Nickel , the world's largest nickel and palladium miner, expects more nickel producers to cut capacity if prices stay at current low levels.

Oct.16 -- Russia's Norilsk Nickel , the world's largest nickel and palladium miner, expects more nickel producers to cut capacity if prices stay at current low levels.

"About 15 percent of global capacity is already closed, some other capacity is unprofitable too. But production is being maintained," Anton Berlin, deputy head of Norilsk sales arm Normetimpex, said in an interview.

Some loss-making nickel producers will cut capacity if prices stay near $17,000 per tonne, with Chinese makers of nickel pig iron (NPI), relatively high-cost producers, likely to move most quickly.

"The most flexible nickel suppliers in the world are China's nickel pig iron producers because it is technologically easy for them to stop importing nickel ore when prices are low," Berlin said.

China's NPI producers are also able to increase output significantly if there is a jump in nickel prices.

Nickel has been the worst performer among base and precious metals this year, down around 6 percent, due mainly to weak demand from European stainless steel producers.

Three-month nickel on the London Metal Exchange was up 1.11 percent in official trading at $17,265 per tonne by 1114 GMT on Monday.

Berlin expected nickel prices to rise slightly in the fourth quarter, thanks to strong demand from China, and for the global nickel market to see a small surplus this year at around 30,000 tonnes.

Norilsk Nickel, which accounts for about 18 percent of global nickel output, is expected to produce up to 305,000 tonnes of nickel at its Russian and international operations this year.

The International Nickel Study Group (INSG) expects global production of nickel to reach 1.69 million tonnes this year, while consumption was estimated at around 1.64 million tonnes.

In the copper market, two percent of which is supplied by Norilsk, an insignificant deficit is forecast due to lower-than-expected production in Chile and Peru, while China will remain the main powerhouse for demand, Berlin said.

Copper has traded in a range of about $8,100-$8,400 a tonne for the past month as investors refocused on underlying demand amid sluggish global growth after the excitement of central bank stimulus measures which sent prices up 10 percent.

Norilsk, which accounts for 41 percent of the global palladium market and 11 percent of the platinum market, sees prices for both as fundamentally lower than they should be, Berlin said.

But the market will balance itself thanks to strikes in South Africa and the rand strengthening, he said.

Industrial unrest has shuttered the operations of platinum miners in South Africa including Anglo American Platinum , the world's largest producer of the metal.

Norilsk, which has its core operations in the Russia Arctic, is the world's fourth-largest producer.

"I can't remember a situation when there were so many strikes in one year. Apparently payments will be raised and all this will add to cash costs, meaning that some companies will become loss-making for some time and will have to cut capacity," Berlin said.

Wildcat strikes broke out in South Africa's platinum belt in August and spread across other sectors of Africa's largest economy. Around 100,000 workers remain on strike, including 75,000 in mining.

The global palladium market will probably see a deficit of 300,000-400,000 ounces this year, thanks to depleted stocks of Russia's state precious metals and gems repository, Gokhran, and restored demand from Asian and North American automakers.

"There are different analysts' estimates of Russian state stocks, but this year supplies from Gokhran were not visible," Berlin said.

Norilsk Nickel nickel output cut

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