Norilsk Says Nickel High Enough to Maintain Spending, Output
bloomberg.com
By Maria Kolesnikova
March 24 (Bloomberg) -- OAO GMK Norilsk Nickel, the world’s largest miner of the metal, said prices are high enough for it to maintain spending and output, bucking an industry trend that is forecast to result in the largest ever production cuts.
Prices at $9,500 to $10,000 a metric ton will allow Norilsk “to breathe freely,” Deputy Chief Executive Officer Oleg Pivovarchuk said in an interview in Moscow today. Anything below that would be a “catastrophe” for some producers, he said.
Nickel has slumped more than 80 percent from the record $51,800 a ton reached in May 2007, as supply outstripped demand. While miners have already announced production cuts equal to about 20 percent of world supply, prices on an annual basis may not rebound until 2010, Macquarie Group Ltd. estimates.
Global nickel demand may reach 1.15 million tons this year, Pivovarchuk said. Consumption was 1.27 million tons last year, for a second consecutive annual decline, according to the Lisbon-based International Nickel Study Group.
Stainless-steel accounts for about two-thirds of nickel demand. Producers of the alloy will cut output by 36 percent this quarter and 26 percent in the following three months, Macquarie forecasts.
Norilsk, based in Moscow, halted its remaining units in Australia last month, saying prices and costs had made the operations “unsustainable.”
The company intends to stay in Australia for now and there are no talks to sell the Cawse mine, Pivovarchuk said. Poseidon Nickel Ltd., an Australian exploration company chaired by billionaire Andrew Forrest, on March 16 said it was in talks to buy the mine, near Kalgoorlie in southwest Australia.
Australian Costs
Costs in Australia are unlikely to drop below a range of $12,000 to $20,000 a ton, Pivovarchuk said.
The company also has mines in Africa, including Tati Nickel in Botswana and Nkomati in South Africa, which produced a combined 23,410 tons of nickel last year. Costs at those mines may drop below $10,000 a ton with better management and by ending contracts that obliges the sale of some production at a discount, Pivovarchuk said.
Norilsk may also send nickel concentrate, an intermediate product, from Africa or its Kola unit in Russia for processing at its Harjavalta refinery in Finland, Pivovarchuk said.
Output is still being sold at a premium of $30 to $230 a ton to the benchmark London Metal Exchange price, Pivovarchuk said. Norilsk rejected a preliminary offer from a Chinese firm for as much as 60,000 tons of nickel at a 5 percent discount to the LME price, he said, forecasting sales to China of 45,000 tons this year.
Norilsk has already signed sales contracts for 75 percent of its nickel production this year, and all of its planned copper output, he said.
To contact the reporter on this story: Maria Kolesnikova in Moscow at mkolesnikova@bloomberg.net.
Last Updated: March 24, 2009 11:20 EDT |
