"nornickel” predicts a fall in the output of nickel, palladium and platinum in 2023, the company said on January 24. The release explains that this is due to the implementation of measures to reduce the impact of operational risks caused by an unfavorable geopolitical situation.
In 2022, the company increased production of nickel, copper, palladium and platinum. Nickel output increased by 13% to 218,970 tons, copper - by 6% to 432,985 tons, palladium - by 7% to 2.79 million troy ounces, platinum - by 2% to 651,000 ounces. The growth, the company explains, is associated with a low base in 2021, when the Oktyabrsky and Taimyrsky mines were temporarily suspended due to flooding, as well as the Norilsk concentrator.
In December 2022, after modernization, production at the Norilsk concentrator reached its full design capacity - about 9.2 million tons of ore per year.
Gold production (in copper and gold concentrates) by Norilsk Nickel in 2022 decreased by 1% to 256,000 ounces, and the output of iron ore concentrate fell by the same amount, to 2.54 million tons.
The company notes that in 2022 it was possible to minimize the impact on operations of new risks associated with changes in the geopolitical situation. In particular, alternative channels for the supply of spare parts were established, purchases of machinery and equipment from new foreign suppliers from friendly countries and Russia began, and new logistics routes were built.
At the same time, Norilsk Nickel expects that the unfavorable geopolitical background will continue to negatively affect operations in 2023. The company also notes that the repair of flash smelting furnace No. 2 (PVP-2) at Nadezhdinsky metallurgical plant.
As a result, in 2023 nickel production may decrease by 2-7% to 204,000-214,000 tons, Norilsk Nickel predicts. Copper production may reach 417,000-441,000 tons, that is, the output of this metal may show both a decrease to 4% and an increase of 2%. The output of palladium, according to the company's forecast, this year will decrease by 8-14% to 2.41-2.56 million ounces, platinum - by 1-7% to 604,000-643,000 ounces. Gold production is expected to be 225,000-245,000 tons (down 4-12%).
Since the moment of Russia’s NVO in Ukraine, the countries that have joined the anti-Russian sanctions have not introduced targeted restrictions against Norilsk Nickel. But in December 2022, the United States approved personal sanctions against the president and largest shareholder of Norilsk Nickel, Vladimir Potanin (through Interros, he controls 37% of the company's shares).
Vedomosti sent additional questions to the press service of Norilsk Nickel.
Stock market expertBCS The World of Investments” Dmitry Puchkarev suggests that under the risks the company means “exchange rate volatility and difficulties with the supply of equipment”. In his opinion, the main reason for the decline in production will be precisely the repair work at the Nadezhda Metallurgical Plant.
Head of Analytics Department for Securities Markets Alfa Bank Boris Krasnozhenov believes Norilsk Nickel's forecast for 2023 reflects a "normalized level of production" adjusted for planned repairs. “The company traditionally has a conservative approach to forecasting its own results,” he added. Dmitry Smolin, senior analyst at Sinara investment bank, agreed that management provided a "rather conservative outlook" for 2023 due to the ongoing asset upgrades and repair program.
Krasnozhenov adds that Norilsk Nickel confirmed at the end of 2022 that it was maintaining its traditional sales geography. He recalls that in the event of barriers to the export of Russian metals to the markets of unfriendly countries, the company has a "plan B".
In March 2022, in an interview with the TV channel RBC Vladimir Potanin said that due to the fact that the company is having logistical problems due to the refusal of European ports to process its cargo (in particular, containers), it is working on a "plan B" - that is, a reorientation "from traditional markets to some other".
Krasnozhenov notes that prices for base metals in Norilsk Nickel's portfolio (nickel, copper and palladium) decreased in the second half of 2022 compared to the first half of the year. According to Alfa-Bank, the company's EBITDA in 2022 will be about $9 billion against $10.5 billion in 2021.
Since the end of 2022, there has been an increase in prices for metals produced by Norilsk Nickel, Krasnozhenov notes. According to him, the current price of nickel exceeded $28,000/t, copper traded at $9300-9400/t, demonstrating “the strongest increase among major base metals” since the beginning of 2023. He also notes the growing demand in the market for nickel and copper and a small number of large projects for the production of these metals, as the industry has remained significantly underinvested in recent years.
According to the London Metal Exchange (LME), on January 24, 2023, nickel futures were trading at $28,320/t (+5% compared to early December 2022), copper futures at $9,292/t (+13%). According to the American Comex exchange, since the beginning of December 2022, the price of palladium has decreased by 16% to $1697 per ounce, the price of platinum has decreased by 0.1% to $1055 per ounce.
According to Puchkarev, the decrease in Norilsk Nickel's production will not affect the balance of the world market and world prices for metals. He notes that the decline in production may lead to a reduction in the company's revenue in 2023, but this effect will be offset by the weakening of the ruble against the dollar due to an increase in export earnings. Krasnozhenov notes that against the backdrop of rising metal prices, Alfa-Bank also expects a positive trend in Norilsk Nickel's financial indicators in 2023.