Norilsk Declines Amid Dividend Concern: Russia Overnight

OAO GMK Norilsk Nickel, the world’s largest producer of nickel and palladium, slumped the most in a month in New York on concern the company will cut its dividends amid a tumble in industrial metals.

American depositary receipts of Norilsk slid 2.2 percent to $14.01 yesterday, extending this year’s plunge to 26 percent. The decline wiped out its premium to the Moscow-listed shares. The Bloomberg Russia-US Equity Index of the most-traded Russian stocks in the U.S. rose for a sixth day in the longest rally since December, led by OAO Mechel. RTS stock-index futures advanced 0.3 percent to 139,630 in U.S. hours.

Norilsk shareholders are discussing potential changes to dividend payments after declines in nickel and palladium prices, three people with knowledge of the talks said last month. The company last year agreed to pay as much as $9 billion in dividends for 2012 through 2014. United Co. Rusal, owner of a 28 percent stake in Norilsk, expects the company to keep its approach to dividend payments, billionaire Chief Executive Officer Oleg Deripaska told Bloomberg News this week.

“People are extremely concerned that dividends will be lower than what was initially agreed on,” Airat Khalikov, an analyst at Veles Capital in Moscow, said by phone yesterday. “Expectation for even lower nickel prices near-term is adding pessimism to the market.”

Nickel prices may extend a slump in the fourth quarter to the lowest since May 2009 with inventories at a record high because of cheaper alternatives to make stainless steel. Stockpiles monitored by the London Metal Exchange climbed this month to an all-time high following a rise in production of nickel pig iron, a substitute metal derived from lower-grade ores. The price may fall as low as $13,000 a metric ton before the end of the year, said Nicholas Snowdon, an analyst at Barclays Plc in New York.

Board Meeting

Norilsk’s board of directors is meeting in Moscow today to discuss the company’s strategy, Deripaska said in the interview with Bloomberg TV. The company declared about $2 billion of dividends for last year. Norilsk’s billionaire Chief Executive Officer Vladimir Potanin said in July that 2013 dividends may be cut.

The company’s 12-month gross dividend yield on the Moscow stock rose 8.7 percent yesterday, recovering from 8.5 percent on Sept. 10, which was the lowest level since July 24, data compiled by Bloomberg show.

Futures on Norilsk Nickel’s Moscow-listed stock fell less than 0.1 percent in U.S. hours. The stock plunged 2.3 percent to 4,608 rubles ($140.46) yesterday.

Mechel, the nation’s biggest producer of coal for steelmakers, rose 6.5 percent to $3.91, the highest level since May 13, as trading volume almost doubled from the average daily level for the past three months. The stock had the biggest gain on the Russia-US gauge yesterday.

Russia ETF

The Bloomberg Russia-US measure added 0.5 percent to 95.60. The Market Vectors Russia ETF, the biggest U.S.-traded exchange-traded fund that holds Russian shares, rose 0.6 percent to $28.11. The RTS Volatility Index, which measures expected swings in the stock futures, declined 0.8 percent to 22.46.

West Texas Intermediate crude rose for the first time in three days as stockpiles at Cushing, Oklahoma tumbled to the lowest level since February 2012 and refinery utilization climbed. WTI for October delivery settled at $107.56 a barrel on the New York Mercantile Exchange.