By Desmond McMahon– Exclusive to Nickel Investing News
The global nickel market will be in a slight deficit this year, metal consultant Metalytics Ltd reported Wednesday. Primary nickel consumption is likely to climb 9.5 percent in 2010 to 1.435 million tons, while primary nickel supply is only expected to rise 5.3 percent to 1.4 million tons, resulting in a deficit of 35,000 tons.
John Barkas, a director at Metalytics, told an industry conference that global stainless steel production is expected to rise 15.3 percent to 29 million tons and is driving the increase in nickel demand, which slumped during the global financial crisis.
But even with economies picking up, Barkas said,”the world is relying on China for the next stage of large (nickel) growth.”
Changes in Store at Norilsk
Shares in Russian miner Norilsk Nickel (LON:MNOD) extended gains Thursday, rising 5 percent to 4,933 rubles after it recommended paying $1.33 billion in dividends for 2009. The move comes as the company prepares to vote on its new Board of Directors. The vote could bring changes to the world’s largest nickel producer’s management and operations.
When Oleg Deripaska purchased a 25 percent stake in Norilsk in Fall 2008 it sparked a power struggled with Vladimir Potanin. Deripaska has a reputation as an aggressive businessman and has been critical of Norilsk’s performance. Word is he wants to increase his control over Norilsk and raise profits and dividends.
Marketwire reports that investors possible shift of control of the company to Deripaska might lead to higher profits and a better relationship with Russian government with the final vote expected next month.
The vote will mark the end of a truce negotiated between the two men by Vladimir Strzhalkovsky when former member of the KGB and government tourism minister was appointed as chief executive in August 2008. Then, Strzhalkovsky undertook a vigorous cost-cutting program to help the nickel miner emerge from the crisis.
Catherine Belton reports in the Financial Times that Strzhalkovsky’s watchful eye saw administrative and labor costs drop by 36 percent in 2009. He reviewed supply contracts and cut out middlemen and Norilsk began limiting financial decision making and concentrated power under the financial leadership of the company. It appears to have worked: in 2009 the company posted $2.65 billion in net profits, well above analyst’s forecasts.
With the extra cash Norilsk announced it will pay off US$1.83 billion of its debts and the board recommended a bumper $1.3 billion dividend on 2009 results, enabling its shareholders, including both Potanin and Deripaska, to cash in on the mining giant’s profit.
Now, in an attempt to extend the savings beyond Russia’s boarders, Strzhalkovsky is looking to streamline the company’s foreign operations. Norilsk is considering selling its 51.3 percent stake in Stillwater Mining, the only US producer of palladium and platinum. Norilsk is also reviewing a possible sale of some under-performing nickel assets in Australia, which have been idle for a year. “We need to understand how effective these investments are.”
“Stillwater was bought with the expectation that it would bring strong synergies. There were a lot of nuances in the sales agreement that limited us to being a portfolio investor. Therefore we are dependent on how effective the management of Stillwater is. Last year they worked badly. This year the situation is better but not as we would want,” explained Strzhalkovsky.