Norilsk Nickel is looking for an alternative to the EU

MMC Norilsk Nickel hopes to redirect supplies of metal to Asia, which some European customers refused in 2023. In 2022, the impact of geopolitics on the geographical structure of Norilsk Nickel’s sales was weak, with the exception of palladium – its purchases by the EU countries were sharply reduced, increasing imports from South Africa. This year the company will be forced to increase sales of nickel and copper to Asia, for which it has prepared a new logistics scheme. Analysts do not see this as a big problem, since it is in Asia that the main future demand for these metals is concentrated.

Some European clients of Norilsk Nickel have refused to purchase its products in 2023, while others have reduced volumes, company president Vladimir Potanin said on March 31. According to him, all volumes not redeemed by the Europeans, the company will sell in the Southeast Asian market. This is the first time that Norilsk Nickel’s top management has acknowledged a significant reduction in demand in Europe.

Back in February, Sergey Malyshev, senior vice president of finance at the company, said that Norilsk Nickel managed to renegotiate contracts for 2023 with “most clients, including large ones.”

“We live in a strange world. Europeans and other consumers are very interested in our metal: it is of high quality, logistically accessible, but due to known circumstances, some companies decide not to buy our metal because of an emotional assessment of the current situation, – said Vladimir Potanin (quoted from “Interfax”).— Some even refuse existing contracts to their own detriment, others refuse traditional volumes, replacing them with others that are obviously less profitable.” Mr. Potanin expressed confidence that the company “will have the strength to return” to the European market, when “the period of instability that has now come will be over.”

Since Norilsk Nickel sold metal contracted in the previous year in 2022, the impact of geopolitics on the geographical structure of sales remained moderate. At the end of 2022, the share of Europe in the company’s revenue decreased from 53% to 43%, and Asia increased from 27% to 31%. The most redistributed supplies of palladium, which is usually transported by aircraft: the ban on flights from Russia to the EU immediately and directly affected its logistics.

According to Eurostat, Russian palladium supplies to the EU in 2022 fell by 25% to 520 thousand troy ounces, while purchases of this metal in South Africa increased by 38.4% to 350 thousand troy ounces.

This metal is primarily used in the automotive industry for the production of autocatalysts. Palladium imports from South Africa hit a record since 2018 with 697,000 troy ounces shipped to Europe and rose despite South Africa’s mining industry being hit by power outages in 2022. Russia is also increasing the supply of palladium to China: according to Chinese customs statistics, they increased by 32.4%, to 245,000 troy ounces.

Norilsk Nickel’s supply chain for other metals is also changing.

Norilsk Nickel’s Logistics Director Ravil Nasybullov said on March 27 that a significant portion of the company’s copper exports had been redirected to the port of Tangier in Morocco, from where it was then shipped to Asia. Nickel still goes through the port of Rotterdam. Prior to the outbreak of hostilities in Ukraine, almost all of the company’s products were shipped from Murmansk to the European market.

The growth of Asia’s share in Norilsk Nickel’s revenue looks quite logical, says Boris Krasnozhenov from Alfa-Bank. In the case of base metals, in the case of nickel, the main consumption is currently in the stainless steel sector (about 70%), and the battery sector is the main driver of demand growth in the next 10-20 years. At the same time, China accounts for about 60% of the world’s stainless steel production. “The London Metal Exchange plans to launch a new spot market for nickel trading in China. This move reflects the shift in the center of consumption to Southeast Asia,” the analyst states.

“If we are talking about the battery sector, six of the ten largest battery manufacturers are Chinese companies,” he notes. In 2022, China’s share of the global battery market was 56%, the country is the leader in the production and sales of electric vehicles. Boris Krasnozhenov cites industry forecasts, according to which by 2030 the total installed capacity of Chinese battery factories could reach 60% of the total capacity of such factories in the world.

Evgeny Zainullin