Interview of MMC Norilsk Nickel General director V. Strzhalkovskiy with Interfax-China

Opportunity knocks for Russian nickel producer to strengthen presence in China
by Ginger Ding

Vladimir Strzhalkovskiy, general director and chairman of MMC Norilsk Nickel, spoke with Interfax to discuss the company's operational strategy and its plans in China in light of the global financial crisis.

Shanghai. March 9. INTERFAX-CHINA - At a time when commodity prices and demand are seemingly in free fall, Russia's MMC Norilsk Nickel, the world's leading nickel producer and longstanding supplier to Chinese stainless steel mills, is hoping to expand its presence in the Chinese market.

After the outbreak of the economic crisis last year, China's stainless steel product prices, like that of most other commodities, dived, which had a knock-on effect on the nickel market. According to Vladimir Strzhalkovskiy, general director and chairman of MMC Norilsk Nickel, China's nickel consumption in 2008 was about 340,000 tons, and he expects the volume to slide in 2009 as Chinese customers are planning to reduce stainless steel production.

Meanwhile, global nickel production is dropping by more than 300,000 tons per year, a trend Strzhalkovskiy expects to continue.

Despite such depressing figures, Strzhalkovskiy remains positive. "We want to be more active in this [Chinese] market. The opening of our Shanghai distribution office, Norilsk Nickel Marketing (Shanghai) Co. Ltd., during this economic downturn shows that we are sincere about strengthening our presence in China," he said.

Now that many nickel pig iron producers, which are only profitable when nickel prices are high, have left the market, Norilsk is keen to take this opportunity to increase its share of China's nickel market, he said.

The three-month nickel contract price on the London Metal Exchange has dropped by more than 80 percent from its high of above $50,000 per ton in May 2007 to $10,000 per ton on March 4, 2009.

Another Norilsk official, who asked to remain anonymous, told Interfax on March 4 that through this new Shanghai office, the company intends to expand its customer base, from primarily the stainless steel industry to also include the plating industry.

Strzhalkovskiy said that the depreciation of the Russian ruble in the last three to four months is good news for exports.

Norilsk exported 30,000 tons of nickel to China in 2008, and "without being too optimistic, we hope the drop [in this year's exports to China] will not be too drastic," Strzhalkovskiy said.

Low production costs of Russian facilities will also improve exports to China, thanks to rich ore and effective production processes, he said.

That said, Norilsk has not been immune to the effects of the economic slump.

Although it does not plan to reduce its production of nickel at Russian facilities this year, which will reach 225,000 tons to 230,000 tons, the company recently cut output by its non-Russian nickel assets.

This year, Norilsk will reduce copper production by 5 percent on an annual basis, and platinum and palladium production by approximately 6 percent.

Currently, Norilsk also has a representative office in Beijing, and another Asian sales office in Hong Kong, however, it has no production facilities in China.

"At present, there are some proposals for mergers with different companies on the table, and not only for base metals projects. But this is not the time to merge, the task of any company [during an economic slump] is to keep up its own production. Norilsk has no need to merge with anybody now," Strzhalkovskiy said.

Strzhalkovskiy said that Norilsk's revenue in 2009 is expected to halve, due to the sharp decline of nickel prices. However, he added the company's relatively stable financial status means Norilsk will not lose staff, massively cut production, or seek additional credit or loans in the year ahead.