Norilsk Nickel (Nornickel) posted revenue growth of 15pc at $15,545mn led by higher prices of palladium, rhodium and the ramp-up of Bystrinsky (Chita) project, while net profit fell by 39pc to $1,760mn on provisions for fuel spill damages, COVID-19-related cost and temporary metal inventory build-up. The group’s average realized prices of refined nickel fell by 3pc to $13,916/mt, while copper rose by 3pc to $6,221/mt.
Outlook – Nickel
Nornickel’s outlook for nickel is neutral in the short-term but more positive in the longer-term. Nornickel expects market surplus at over 90,000mt in 2021, while demand is forecast to recover by 8pc boosted by the growth of Indonesian stainless and battery sectors. The rapid expansion of Indonesia’s NPI capacity to translate into 8pc rise in global supply. The battery sector tops consumption in the next 5-10 years and the world moves towards carbon neutrality.
In 2021, Indonesia’s total nickel production is expected to increase above 900,000mt on commissioning of new NPI projects, which could offset the reduction of NPI output in China. Additional supply disruptions of up to 50,000mt could occur if VNC and some other ferronickel assets are shut.
Over the longer term, the global electric vehicle market is expected to maintain double-digit growth rate supported by subsidies in European nations. The negative impact of COVID-19 on the global EV market was lower than anticipated.
In 2021, primary nickel demand could increase by 8pc driven by 36pc higher stainless steel production in Indonesia and moderate growth in stainless output in China, up 3pc alongside increased consumption by the battery industry, up 21pc. Other non-SS industries are expected to lift nickel demand by 6pc on recovery in end-use demand.
In 2021, the market will remain balanced and the outlook is neutral for the short-term. Nornickel has a positive longer-term outlook as the copper surplus moderately expands while supply recovers by a percent outpacing the forecast consumption rebound of 3pc. Copper is a critically raw material for the global transition towards a carbon-neutral economy.
In 2021, global mine production could rise by 3pc to 21.3mn mt on new production ramp-ups in Peru, China, Indonesia, Zambia, US, Australia, the DRC and other regions.
In 2021, nornickel expects consolidated nickel production to reach 220,000-230,000mt and copper output at 390,000-410,000mt.
In 2020, nickel sales accounted for 21pc of the group’s total metal revenue, down from 26pc in the prior year, mainly due to the difference in nickel’s price dynamics compared to other metals. In 2020, nickel revenue fell by 7pc to $3,144mn amid lower sales volume and realization. Sales volume of refined nickel from own feed fell by 7pc or 15,000 mt to 198,000mt due to temporary accumulation of inventory amid weak demand owing to the COVID-19 pandemic. Sales volume from third-party feed was unchanged at 3,000mt. Sales of nickel semis rose by 20pc to $342mn driven by higher sales volume.
Copper sales contributed to 21pc of the total metal revenue in 2020, up 7pc to $3,078mn on higher sales volume and realization. Refined copper sales volume from own feed fell by 1pc or 6,000 mt to 427,000mt owing to lower output from concentrate bought from Rostec. Copper semis revenue rose by 65pc to $424mn amid higher output at the Bystrinsky project.
In 2020, capital expenditures rose by 33pc to $1.8bn, while net debt dropped more than 30pc bringing down net debt to EBITDA ratio to 0.6x.
Earlier, on Feb 5, the Arbitration Court of Krasnoyarsk Kray awarded diesel spill damages of RUB146.2bn ($1,979mn, as of Dec 3, 2020) to Rosprirodnadzor for an environmental incident in May 2020 in the Norilsk industrial area. The group has set up a provision to fully covers the damages and expenses related to the incident.