Nickel Industry Needs to Cut Output Up to 30%, Top Producer Says

  • Glut means price unlikely to recover soon, Norilsk Nickel says
  • Current rate should be `ice shower' for unprofitable producers

The nickel industry needs to cut output by as much as 30 percent to reduce a glut that’s depressing prices of the metal, according to one of the world’s two-biggest producers.

"We should see about 20 percent to 30 percent of the global output idled to have any positive effect on the market," GMK Norilsk Nickel PJSC First Deputy Chief Executive Officer Pavel Fedorov said in an interview in Davos on Wednesday.

The worst-performing major metal on the London Metal Exchange last year has extended losses in 2016. About 70 percent of the industry’s capacity is unprofitable at market rates, according to Norilsk, which vies with Vale SA as the largest producer. The price is an "ice shower" that should encourage producers to cut output, Fedorov said.

Palladium and platinum, also mined by Norilsk, may recover faster as they’re in structural deficit, Fedorov said. There may be indications of a copper shortage in 2018 or 2019, he said.

In December, Norilsk attracted Chinese investors for a new copper mine in Siberia and plans to start the operation in 2017. The company also this year raised its first yuan debt, equivalent to more than $700 million. The loan was swapped into dollars and is among the cheapest borrowing in Norilsk’s portfolio, Fedorov said.

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