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March 5 (Bloomberg) -- OAO GMK Norilsk Nickel, Russia’s largest mining company, offered to process “substantial”
amounts of the nation’s copper stockpiled during the Soviet era as the company struggles to meet demand from its own supplies.
     “We are running short of copper and could be selling more than we are producing,” Deputy Chief Executive Officer Oleg
Pivovarchuk said in an interview in Moscow, declining to say whether Norilsk would buy the metal or just process it. “We
made a serious offer to the government for the copper.”
     Moscow-based Norilsk submitted its offer to Rosreserve, the federal agency overseeing the inventories, about two weeks ago
and it anticipates the proposal may be approved by April or May so stockpiles can be processed before winter, Pivovarchuk said.
     Norilsk CEO Vladimir Strzhalkovsky on Jan. 30 met Prime Minister Vladimir Putin and asked him to help speed up approval
of the plan. An account of the meeting on the government’s Web site didn’t give details of the company’s offer, saying only
that it involved state reserves of copper concentrate, a semi-processed ore that is shipped from mines to smelters.
     The company is seeking ways to benefit from a price rebound as its production falters because it is mining ore with a lower
copper content. Strzhalkovsky, who forecast copper production will drop 5 percent for a second year in 2010, told Putin that
allowing Norilsk to process the state reserves will help use up idle capacity, according to the government’s Web site.

                        Speculative Gains

     Norilsk will mix stockpiled concentrate, which contains nickel, precious metals and cobalt as well as copper, with its
lower-grade feed, Pivovarchuk said March 2. The company doesn’t maintain any stockpiles of copper or nickel, he said.
     Processing the concentrate may take more than a year and probably won’t “significantly” increase Norilsk’s copper
output, said Alexei Morozov, an analyst at UBS AG in Moscow.
Norilsk produced 402,214 metric tons of copper last year.
     Prices for copper, used in wires and pipes, and nickel, a stainless steel raw material, have been driven higher by
speculation and may be unsustainable, Pivovarchuk said. Copper for three-month delivery on the London Metal Exchange more than doubled last year and traded at $7,485 a ton at 10:53 a.m. in London. Nickel was last trading at $22,675 a ton after jumping
58 percent during 2009.
     Nickel producers may restart idled capacity should prices hold above $20,000 a ton, adding to a surplus this year that may
reach 25,000 tons to 30,000 tons, Pivovarchuk said.

                       Restarting Furnace

     Industrial Metallurgical Holding, Russia’s third-largest nickel producer, restarted a fourth furnace at its Ufaleynickel
unit last month as metal prices and demand improved, leaving one more furnace idle, spokesman Pavel Kovalenko said by telephone today. Ufaleynickel, which halted output for eight months last year, can break even with nickel above $24,000 a ton, he said.
     “Every additional 25,000 to 40,000 tons could have a very negative impact” if investor sentiment on nickel turns, causing
a plunge in price similar to the one in 2008, Pivovarchuk said. “The higher the price is now, the lower it will fall.”
     A copper price above $7,000 a ton is “unjustified,” while palladium is “clearly undervalued” and should cost “somewhere
between platinum and gold,” he said.