Norilsk Nickel is considering cutting nickel capacity by 10 percent next year as some European buyers stop buying nickel from Russia and there could be a surplus, according to media reports citing sources.
Nickel futures on the London Metal Exchange rose as much as 7.1 per cent on the news, although they remained below the day's high.
Russia's largest mining and metallurgical company is also the world's largest nickel and palladium producer, controlling about a tenth of the global nickel market and targeting production of 205,000 to 215,000 tonnes this year.
People familiar with the matter said that some customers had already been informed of its plans to cut production.
A 10 per cent cut would bring production close to 2021 levels, when supplies at the company's two main mines were affected by flooding.
Nickel's biggest use is in stainless steel, which produces more than 70% of the world's nickel. Nickel is also an important raw material for electric car batteries.
Although the United States last week announced sanctions against its largest shareholder and CEO Vladimir Potanin, the company was not sanctioned.
The Treasury Department said that based on information obtained by the Office of Foreign Assets Control (OFAC) as of December 15, 2022, Potanin did not control more than 50 percent of Nonni shares and therefore the company would not be a sanctioned property of Potanin.
Still, it has been hit by disruptions to logistics, insurance and shipping caused by the conflict between Russia and Ukraine. Finland's national railways will stop cargo traffic with Russia at the end of December, meaning that it will be forced to find other ways to supply its Harjavalta subsidiary in Finland.
The global nickel market could see a potential surplus of about 110,000 tonnes next year, the company said last month. This autumn, the LME launched a consultation on whether to ban Russian metals. Although the LME ultimately decided not to ban the Russian metal, the impact was felt, with the 2023 contract temporarily suspended for about a month.
LME nickel futures are up 40 per cent this year. However, liquidity for the LME nickel contract fell sharply in March after the "tempest", raising questions about its usefulness as a benchmark for global nickel futures.
The average daily volume on the LME in November was just 35,400 contracts, down 60 per cent from January, the data show. The industry believes that the price of Lun nickel has been unable to reflect the market fundamentals.
