Norilsk Nickel plans to expand nickel production to meet growing EV demand

Russian copper and nickel producer Norilsk Nickel unveiled plans to expand its nickel and copper production by 15% over seven years in a presentation to investors in London on Monday November 19.

The expansion program, with a base investment of $6.5-7.5 billion, is expected to be approved in early 2019. Norilsk Nickel forecasts its production of class-1 battery-grade nickel grow by 50% by 2025.

“Batteries are the best thing that has happened to nickel in 100 years, since the invention of stainless steel,” Norilsk Nickel marketing director Anton Berlin said in an interview with Fastmarkets after the investor presentation.

The Russian producer forecasts growth in nickel and copper production of up to 15% after 2025 and up to 25% for platinum and palladium.

Primary nickel supply will come mainly from two mines in the Norilsk region, Talnakh and South Cluster, that are yet to be fully developed.

Meanwhile, Norilsk Nickel`s overall capital expenditures in 2019-2022 are expected to reach $10.5-11.5 billion. It plans to spend $6.5-7.5 billion on automation and infrastructure modernization in three years, depending on investment decisions early next year.

The planned environmental expenses for the same period are $2.5 billon.

Geographic location remains a key aspect of the company’s sales strategy and market share. During 2018, total nickel sales have been 57% European, with 26% going to Asia.

“Europe is a market where we feel we have a competitive advantage,” Norilsk Nickel’s head of global sales and marketing, Markus Meurer, told Fastmarkets.

Fastmarkets MB assessed the European nickel briquettes premium indicator on an in-warehouse Rotterdam basis at $245-275 per tonne on Tuesday November 13. Spot premiums were flat week on week and have hovered at annual lows in quiet trading conditions while long-term contract negotiations continue.

Similarly, investment in electric vehicles hinges on stability in the metal’s London Metal Exchange price, which has fallen more by than 33% from the 2018 high of $16,690 per tonne on April 19.

Nickel’s three-month price on the London Metal Exchange closed at $11,180 per tonne on Monday November 19, its lowest level since December 2017.

“With regards to electric vehicle investment, it’s very difficult to say anything about the price at the moment. When we’re talking about value for investors, opinions will vary. What I do know is that there is a deficit in the nickel market, and demand is outpacing supply. This is evident by falling global stocks,” Commerzbank Research analyst Eugen Weinberg told Fastmarkets.

“The current [LME] nickel price is unlikely to increase, and primary production at the current level is unlikely to benefit prices. In addition, macro jitters and negative market sentiment remain a factor. It could test $10,000 per tonne before it tests $15,000 per tonne,” he added.

The global nickel supply deficit for 2019 is expected to narrow to 22,000 tonnes from 143,000 tonnes in 2018, Xu Aidong, chief analyst of Chinese research organization Antaike, said at a nickel and cobalt conference in China on November 7.

Battery-uses for nickel are expected to develop into the second largest liquidity pool for Norilsk Nickel by 2025 and is pegged to improve the company’s refined nickel portfolio.

“We see it as a target market because there we do not compete with laterite products. It will be an area of natural advantage to be present in that market,” Meurer said.

Elsewhere, Norilsk Nickel has recently established a partnership with BASF to get closer to the battery materials sector, while the company is discussing other commercial relationships and partnerships with market participants, with a particular focus on hybrid vehicles, Meurer confirmed.

“Hybrids are a perfect case for our basket of metals,” Berlin told investors.

Producers are shifting from NCA (comprised of lithium, nickel, cobalt and aluminium oxide) batteries to NCM (lithium, nickel, cobalt and manganese oxide) because they are easier to produce and less costly, Berlin said.

“Nickel is going to be a part of the recipe for the long term, we are very confident about that,” Meurer added.

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