Norilsk Nickel is looking for ways to Finland

MMC Norilsk Nickel is looking for ways to supply its large nickel plant in Finland with raw materials after local rail operator VR refused to carry Russian cargo. MMC is considering the possibility of working with other operators, as well as deliveries directly by sea. Analysts consider the last option the most realistic. Amid rumors about possible problems with the Finnish plant, world nickel prices have risen by more than 25% over the past week.

Norilsk Nickel is considering alternative ways to deliver raw materials to the Finnish plant Harjavalta at a time when the state-owned railway operator VR is in the process of phasing out transportation between Russia and Finland.

As a representative of Norilsk Nickel explained to Kommersant, interaction with other railway operators, as well as a sea route, are considered as possible options.

The company does not name specific routes and options. Previously, nickel concentrate was transported from Murmansk to Harjavalta by rail.

In March, VR stopped receiving freight trains at all Russian-Finnish railway junctions (see “Kommersant” dated March 27). The reason is the British sanctions against Russian Railways: the Finnish company explained that VR Group’s agreements with banks require it to “listen” to the decisions of the UK authorities, despite the fact that it is not registered in the UK and is not under its jurisdiction.

The Norilsk Nickel plant is located in the Finnish Harjavalta and is part of the company’s Kola division. The Finnish asset processes Russian nickel-containing raw materials, as well as some raw materials from third-party suppliers. In 2021, the plant produced 47.1 thousand tons of nickel, including 44.1 thousand tons from Russian raw materials.

In 2021, the Norilsk Nickel Harjavalta plant produced 24% of nickel, 1% of copper and 1% of platinum group metals of Norilsk Nickel’s total final output, according to the company’s annual report.

The railway network in Finland is owned by the state. The main player in this market is VR, but there are other companies as well. So, in 2020, the Finnish authorities issued a permit for freight transportation within the country to the Estonian operator Operail. This Estonian state-owned company is also the railway operator of the port of Hanko, which is located about 230 km from Harjavalta. In addition, the port of Pori is located about 30 km from Harjavalta.

According to Mikhail Burmistrov, head of Infoline-Analytics, it will be extremely difficult for Norilsk Nickel to establish cooperation with other railway operators due to geopolitical disagreements between Western countries and Russia. The most likely solution is the delivery of goods by water and road transport, the expert believes.

Possible interruptions in nickel supplies from Norilsk Nickel’s Finnish plant could cause increased volatility in world nickel prices.

Over the past six trading days, the metal has risen in price on the LME by more than 25%, and on Tuesday, March 15, futures for delivery in three months reached a six-month high of $30,179 per ton. On Wednesday, quotes fell by almost 10%. On November 11, the Argus agency noted unconfirmed rumors about Finland’s ban on the use of its railways by Norilsk Nickel as possible reasons for the price increase. A market participant told Argus that fears of disruption could lead to panic buying.

Norilsk Nickel is not the first time faced with problems in logistics due to geopolitics. In July, the company’s president, Vladimir Potanin, told RBC that the company is considering alternative channels for the supply of its metals, oriented to China and the markets of Southeast Asia, in case the port of Rotterdam refuses to accept Russian cargo. An alternative chain is being built through the port of Tangier in Morocco. In addition to North Africa, the company is creating a new logistics center in the UAE. In addition, according to Mr. Potanin, Norilsk Nickel has to expand its own fleet and cooperate more actively in the construction of icebreakers to ensure traffic along the Northern Sea Route directly to Asia.

Evgeny Zainullin