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The world economic crisis has increased Norilsk Nickel’s focus on China, as demand weakens in the company’s traditional markets, marketing director Anton Berlin told MB.

Norilsk recently boosted its presence in China by opening a new sales office in
Shanghai and the Russian company is expecting its business to grow there, according to Berlin.

China accounted for roughly 10% of the company’s business in 2008.

“Even before the crisis, China was an obvious leader in growing consumption of metals and the crisis has just emphasised this,” he said.

 “China is one of the best survivors in this market. China has enough financial resources to invest in domestic infrastructure projects, which will be a big help to the economy.”

Europe is Norilsk’s largest market, but Berlin said the company was experiencing difficulties there and in other key regions.

 “Europe has been the most troublesome region for us. Sales in the USA are a little smaller. Russia is a bit disappointing.”

Berlin predicted that the nickel and copper industries will see a number of single-commodity producers going out of business if prices remain at current low levels.

“At some point a number of producers will have to go out of business because the market price is too low for them. If you are a smaller producer with only one metal and you are working in one local market, it’s a very high risk. If your customer goes out of business, you have lost your client base.”

Around 10% of global nickel production was suspended last year and the industry
can expect another few percent of production capacity to be idled, said Berlin.

Norilsk is better-placed to deal with the dangers faced by smaller competitors in the industry, he said.

“You look at companies like Norilsk and the other big mining houses,” he said.

“We are diversified, we have a range of commodities, so it can’t be devastating because we are naturally hedged with different clients.

 “We are delivering more material to other industries outside of the stainless steel business, which is a more sustainable business model.”

The market had stabilised for the time being, but it was hard to guess if it has bottomed out, Berlin said.

 “What you will get in a couple of years time is people saying ‘it was obvious that things were going that way’, but when you are in the middle of it, it’s really not because when you look at those indicators, they seem rather stable.”

He was cautious on predictions about the future of LME stocks, but indicated that the exchange is likely to see a further increase in material delivered to warehouse.

“When you have producers worldwide and their consumers are decreasing intake or going out of business, you still want to have certain cash in hand. So, people are delivering to LME because they want the cash.”

 “It’s hard to predict where it is going; probably it [stock] will further increase, but I will not be able to forecast by what size.”