Norilsk Nickel Urges Output Cuts From Other Miners – by Alex MacDonald (Wall Street Journal – May 17, 2016)

LONDON– Norilsk Nickel Mining & Metallurgical Co. (NILSY), the world’s largest nickel producer, is urging other nickel miners to consider cutting production in response to the low price environment, but said it won’t contribute to those cuts.

The Russian nickel producer, which also produces palladium, platinum and copper, estimates that about 70% of the world’s nickel production capacity is currently loss-making, but only 17% is at risk of shutting down even though the nickel price hit a 12-year low in February and is still down 37% over the past year.

“We do hope that…this year there will be serious discussions at management and boardroom [levels] as to how they should react to the market, because for us there should be some response from the industry” to the price drop, said Sergey Dubovitskiy, Norilsk’s head of strategy. But “given our lowest cost position on the cost curve, this shouldn’t be us,” he told The Wall Street Journal in an interview on Tuesday.

Nevertheless, Norilsk expects nickel output from its core Russian operations to drop to between 206,000-212,000 tons this year from 224,000 tons last year due to the closure of an aging nickel plant and a shift toward nickel-refining operations in Western Russia.

As the world’s lowest cost nickel producer, Norilsk produces nickel effectively at no cost since it is able to use the proceeds from the sale of by-products, such as platinum and palladium, to more than offset the cost of producing nickel.

Nickel has been the worst-performing industrial metal this year because of massive stockpiles that accrued before Indonesia imposed an export ban on nickel ore in early 2014. Slackening demand in China, the world’s second-largest economy, has also taken its toll on nickel demand growth.

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