Norilsk Nickel acquired 50% in a project with TMK to create a plant producing rolled stainless steel

Norilsk Nickel entered into a joint project with TMK to create a plant for the production of flat rolled stainless steel. Thus, the company will increase the domestic sales market for its nickel, while there is a surplus on the world market. The capacity of the plant in Volzhsk will be 500 thousand tons per year, the cost of the project in 2021 was estimated at 100 billion rubles. According to analysts, participation in the project will allow Norilsk Nickel to redistribute up to 10% of its nickel sales from exports to the domestic market.

“Norilsk Nickel” I bought 50% in Russian Stainless Steel Company-Holding LLC (RNA), which is building a plant for the production of flat rolled stainless steel. The other 50% belongs to the Volzhsky Pipe Plant, which is part of TMK. RNA was established in 2021 in equal shares by the Volzhsky Pipe Plant, TMK and the Chelyabinsk Electrometallurgical Plant (ChEMK, a large producer of ferroalloys). Construction of the plant was then estimated at more than 100 billion rubles.

As Norilsk Nickel reported, the capacity of the new plant will be up to 500 thousand tons of finished products per year.

The cold rolling shop is planned to be launched in 2025, the hot rolling shop in 2026, and the electric furnace melting shop in 2027. The company noted that participation in the project will expand the nickel sales market, and Norilsk Nickel, as the owner of 50% of the plant, “will receive the right to its share of the profits during the operational phase of the project.”

The market for flat rolled stainless steel in the Russian Federation is characterized by a diversified consumption structure and, according to forecasts, will grow steadily. In 2022, stainless steel consumption in Russia amounted to about 340 thousand tons, and the forecast for 2030 is 450 thousand tons.

However, most of the consumption is imported. The government-approved strategy for the development of the metallurgical industry states that in 2021 Russia increased imports of rolled stainless steel by 35% compared to 2019, to 423 thousand tons. The production of such rolled products decreased by 2.4%, to 129 thousand tons. Imports fell sharply in 2022, but continued to grow in 2023. According to the Special Steel Association, in November 2023, compared to October, imports of main types of stainless steel products increased by 72%, to 53.7 thousand tons. “This volume is another record for stainless steel imports for modern Russia,” the association notes. According to its data, the volume of imports of flat cold-rolled steel increased by 62.2%, flat hot-rolled steel – by 167.6%, seamless pipes – by 72%, long products – by 21.4%, welded pipes – by 55.7% .

Norilsk Nickel is now faced with an unfavorable environment in the global nickel market, where supply from Indonesia is growing and demand is stagnating. Norilsk Nickel in its December review announced an increase in estimates of the nickel surplus on the world market in 2024 from 200 thousand tons to 250 thousand tons. Since the beginning of the year, stock exchange quotations for the metal have fallen almost twice, to $16 thousand per ton.

Now, due to the increased cost of logistics and geopolitical discounts, the domestic market is becoming a premium market for the sale of first-process products, comments independent analyst on the natural resources sector Boris Sinitsyn. “For example, carbon sheet steel from the first stage is currently 20% more expensive than the export alternative. Therefore, increasing sales in the domestic market is beneficial, but there are volume limitations,” he notes. The analyst emphasizes that, although the plant in Volzhsk will cover the needs of the domestic market for stainless steel sheets even on the horizon until 2030, for Norilsk Nickel deliveries there mean a redistribution of only 10% of nickel production to the domestic market, so the share of the company’s domestic nickel sales may increase up to 20%.

Dmitry Kasatkin from Kasatkin Consulting adds that the domestic market is highly dependent on imports of stainless steel. “In 2022, thanks to reserves, we managed to keep the market from a deficit, despite a decrease in imports. If imports stop completely, then serious problems are possible, so such a project is of strategic importance,” he believes.

Evgeny Zainullin, Dmitry Kozlov