Norilsk Nickel Jumps on Metal Price Outlook as Russia ADRs Gain

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OAO GMK Norilsk Nickel rallied, helping drive a gain in U.S.-traded Russian stocks, amid speculation that prices for the metal will continue their rebound from a six-year low as stockpiles fell from a record high.

The American depositary receipts of the world’s largest nickel producer rose 2.9 percent to $20.67 in New York, the highest since July. It was the third-best performance on the Bloomberg Russia-US Equity Index, which added 0.2 percent. Nickel, a metal used in stainless steel production, has gained 13 percent from a six-year low reached March 31 on the London Metal Exchange, or LME.

Norilsk has climbed 50 percent in 2015 as nickel recovered from a bear market on bets that the slump in prices was overdone amid a tightening supply outlook and increased economic stimulus in China, the world’s biggest consumer. Russian stocks have soared with the ruble this year as the prospect for a lasting cease-fire in eastern Ukraine and rising oil prices helped boost investor sentiment.

“A rebound in nickel prices and expectations of further gains are the main drivers pushing Norilsk Nickel higher,” Andrey Tretelnikov, an analyst at Rye, Man & Gor Securities in Moscow, said by phone. “There are fundamental reasons why the market expects higher prices and those include a recent strike in Colombia and last year’s export ban on nickel shipments by Indonesia.”

The Bloomberg gauge of Russian stocks in New York traded near a five-month high on Wednesday. OAO TMK rose 6.7 percent to $4.28 while CTC Media Inc. jumped 4.2 percent to $3.48. The Market Vectors Russia ETF, the biggest U.S. exchange-traded fund tracking the nation’s shares, fell 1.3 percent to $19.94, while Russian equity futures expiring in June on Moscow’s RTS Index fell 0.5 percent in U.S. hours. United Co. Rusal lost 0.4 percent to HK$4.68 at 10:38 a.m. in Hong Kong.

Price Pressure

Nickel closed at $13,970 a metric ton in London on Wednesday, while stockpiles in LME-monitored warehouses fell for a third day. The benchmark contract for three-month delivery rose to $14,040 a ton at 10:39 a.m. Hong Kong time. The metal may advance to $19,000 by the end of 2015 as supply tightens and demand picks up, Societe Generale SA said April 30.

In April, the metal capped the steepest monthly gain in a year due to a strike at BHP Billiton Ltd.’s Cerro Matoso in Colombia, the world’s second-biggest ferro-nickel mine. The strike ended on May 1. Indonesia has curbed nickel exports since 2014 in a bid to promote local processing of the metal.

“Nickel inventories remain high and will pressure the metal prices down,” Oleg Petropavlovskiy, an analyst at BCS in Moscow, said by phone. “We are far from sharing optimism on Norilsk Nickel outlook, as the company plans to sell its Inter RAO stake at a loss and stronger ruble is not helping it either.”

Norilsk said Wednesday its board of directors approved an April 30 sale of about 11 percent in the Russian state-run power producer OAO Inter RAO UES, according to a regulatory filing. The stake is worth about $275 million, Tretelnikov at Rye, Man & Gor Securities said. That compares with a 2012 valuation of as much as $1 billion.

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