By Ese Erheriene
LONDON--The world's biggest nickel producer, Norilsk Nickel
(NILSY), sees nickel prices moving off six-year-lows on the back of
strong Chinese demand, the company's deputy chief executive, Pavel
Fedorov, said Monday.
China's large stockpiles of high-grade Indonesian nickel are
running down, and the Asian giant won't be able to rely on new
supplies from Indonesia because the export ban in place since
January last year will remain in place, Mr. Fedorov said.
"Inventories are going down [and] there is a structural deficit.
China has no other route so they are calling us--they've eaten up
all the high-grade ore they sourced from Indonesia. We see all the
signs of industrial demand still being there," said Mr.
Fedorov.
Nickel prices on the London Metal Exchange hit near-six-year
lows last month at $12,205 a metric ton because of concerns that
there will be too much production. They have since come back
somewhat: on Monday, spot nickel was trading on the London Metal
Exchange at $13,775.00, down 0.65% from Friday.
Mr. Fedorov shrugged off the worries about too much supply, and
said Norilsk has no plans to close down production.
He said that because Norilsk mines gold, platinum and other
precious metals alongside nickel, it can produce nickel at far
lower costs than other producers. Mr. Fedorov said that while many
producers aren't profitable at prices below $18,000 a ton, Norilsk
is "minting in this environment" of $12,000 prices.
Earlier this month, Canada's BMO Research said the firm's focus
on nickel, palladium and platinum puts it in a sweet spot in terms
of minerals, and that it is one of the most efficient miners out
there. BMO said it rates the firm's American Depositary Receipts at
outperform with a target price of $23.00. On Monday, the ADRs were
up 0.8% at $20.95. The shares are up nearly 52% since the beginning
of the year.
Some analysts, however, think nickel prices are headed
lower.
"We still see no major production cutbacks in nickel. We still
see rising inventories [and] the latest data still show a supply
surplus on the global market. Over a longer term, these are clearly
arguments for lower prices," said Daniel Briesemann, a metals
analyst at Commerzbank.
Mr. Fedorov also said that currency moves were driving platinum
prices lower.
The loss of value in the South African rand has made platinum
mining there more lucrative, according to Mr. Fedorov.
"[The] rand depreciated quite a bit. So for these guys
production became more economic and that's why you actually see the
spillover effect on platinum prices," he said.
South Africa accounts for about a third of global platinum
supply, but production has been hit by operational and labor
issues.
Mine workers in South Africa went on strike in January last year
for five months, which led to a 21% decline in production in
2014--its lowest level in 15 years at 4.7 million ounces, according
to the Thomson Reuters GFMS Platinum and Palladium Survey 2015.
The strike is now over and production is returning to normal.
But the Norilsk Nickel executive said concerns will still push
prices higher.
"We still see pretty major risks to stable and uninterrupted
supply of platinum from South Africa, those risks need to be
addressed," Mr. Fedorov said.
Platinum on the London spot market was trading up 1.0% at
$1,175.62 a troy ounce on Monday. Prices were down 3% since the
beginning of the year.
Write to Ese Erheriene at ese.erheriene@wsj.com
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