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LONDON (Dow Jones)--Russian nickel miner OAO Norilsk Nickel (GMKN.RS) said Monday the nickel market is getting closer to balance and prices will average $10,000 a metric ton in 2009.

However, Deputy Chief Executive Officer Oleg Pivovarchuk told Dow Jones Newswires that while production cuts are bringing the market closer to balance, prices could still fall due to poor demand.

"The market is starting to find a balance," Pivovarchuk said. "But it's highly possible that nickel will decrease again."

Around 70% of nickel is consumed in stainless steel, and, Pivovarchuk said, stainless steel production is down 36%.

As a result, he said demand for nickel in 2009 will be 250,000 tons lower on the year at around 1.15 million tons.

Norilsk will produce no more than 300,000 tons of nickel to match lower demand, Pivovarchuk said. In 2008, Norilsk produced 299,721 tons.

Due to low prices the company has already placed its Australian operations on care and maintenance. These account for roughly 43,500 tons of capacity. Pivovarchuk said the Australian assets were hit particularly hard by the drop in nickel prices, which fell 80% at the end of 2008 from a record high in 2007.

The cost of production ranged between $12,000/ton and $20,000/ton at the Australian operations and prices on the London Metal Exchange are currently trading around $10,750/ton, having fallen as low as $8,850/ton in October.

Consumption in Europe, one of the company's main areas of demand, is also suffering. Norilsk is still negotiating 15,000 tons of metal it usually sells under contracts.

"We hope to compensate a drop in sales in Europe by increasing deliveries to China," Pivovarchuk said. He said the company aims to sell 45,000 tons of nickel to China this year, up from roughly 37,000 tons in 2008.

The company opened a distribution office in Shanghai in March and Pivovarchuk said Norilsk plans to get nickel and copper registered on the Shanghai Futures Exchange and palladium registered on the Shanghai Gold Exchange.

However, Tati Nickel in Botswana and Nkomati in South Africa are continuing to operate, Pivovarchuk said. He said Norilsk has no intention of shutting or selling them but that it will delay increasing output.

"Our African assets are a little better situated than our other assets abroad," Pivovarchuk said.

"They are functioning well and we are not going to cut or close the operations. We want to optimize production on these assets. We won't try and increase production at least for the moment given the situation in the metals market," he said.