Norilsk Sees Nickel Surplus at Smallest in Four Years

OAO GMK Norilsk Nickel, the world’s largest producer of the metal, forecast the market surplus will shrink to the smallest in four years in 2014 after the Indonesian ban on ore exports.

The surplus will drop to 24,000 metric tons this year, compared with 173,000 tons in 2013, Norilsk said in a presentation for its Capital Markets Day in London today. There will be a shortage of nickel in 2015 as China depletes stockpiles of ore, which currently cover six months of requirements, the producer said.

Nickel is the best-performing metal this year after Indonesia halted shipments of unprocessed ore. China, the world’s largest consumer, uses the ore to make nickel pig iron, a nickel substitute derived from lower-grade ores. The nickel price has risen almost 40 percent this year and touched $21,175 a ton on May 13, the highest level since February 2012.

The last nickel market deficit was in 2010, while last year, the surplus reached 191,000 tons, according to Macquarie Research.

Norilsk estimates that China held about 20 million tons of ore in stockpiles as of May in total. It’s high-grade ore stocks are enough to cover a month of production, down from four months in February. Low-grade ore stocks are down to four to six months’ needs, from nine months in February.

The Russian producer sees China’s nickel pig iron production dropping by 100,000 tons this year and 210,000 tons in 2015. The country produced 502,000 tons in 2013, according to Macquarie Research.

Norilsk, also the world’s largest palladium producer, forecasts the deficit in the metal this year will widen to 1.35 million ounces from 950,000 ounces in 2013.

The deficit in platinum will persist because of instability in shipments from South African producers, the presentation shows. The gap will decline from 690,000 ounces in 2013 to 370,000 ounces this year and 330,000 ounces in 2015.

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