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Yesterday

Nornickel adopts updated environmental strategy

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De Beers ready for new G7 diamond import requirements

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Yesterday

EU significantly reduced copper imports from Russia

The EU member states purchased 62,372 tons of copper from Russia in 2023, which is 79% lower than the previous year, Vedomosti newspaper reports.

Yesterday

Norilsk Nickel presents metals market review

05 december 2023

Norilsk Nickel, the world’s largest producer of palladium and high-grade nickel and a major producer of platinum and copper presents the twelfth review of the nickel, copper and platinum group metals (PGM) markets.

Full reports are available on Nornickel’s website.

Nickel

LME nickel price has continued its downward trend throughout the second half of 2023. As the company said in its last review, the main reason for the falling price was worsening market fundamentals, which included a substantial increase in low-grade nickel production, further rises in capacities to convert Class 2 into LME-deliverable Class 1, and, as a result, a significant market surplus.

These factors continue to dictate the current state of the market, with the nickel price plummeting to $16,000/t, down by almost 50% YTD from more than $30,000/t at the beginning of the year. However, Nornickel believes that the current price level is not sustainable from the fundamental perspective as more than a half of nickel producers are now making losses, considering the current level of discounts on Class 2 nickel.

Nornickel has revised the 2023 market surplus forecast from over 200 kt Ni to more than 250 kt Ni, mostly in low-grade nickel. This is primarily attributed to a lower-than-expected nickel use in the battery sector due to the continuing destocking cycle in the EV supply chain, a greater share of non-nickel LFP batteries, and a partial shift from BEV to PHEV sales in China, even though EV deliveries are still hitting new record highs. Meanwhile, the launch of new Indonesian nickel capacities continued at a high pace.

In 2024, the company expects the nickel market to sustain a surplus of more than 190 kt Ni owing to the glut amassed in the low-grade market. The commissioning of the Indonesian nickel capacities is expected to maintain its growth rate, however, the most significant contribution would come from NPI-to-matte and HPAL facilities, while the increase of NPI output is forecast to slow down to 5% YoY only. The ramp-up of new Class 1 projects in China and Indonesia is also projected to continue at a high pace, while production in other regions remained slightly unchanged YoY.

However, given the substantial increase in working stocks over the last years, which, according to Nornickel's calculations, rose by as much as 100-200kt Ni, the actual market surplus, i.e. excessive material available for immediate delivery, could be much smaller.

Copper

Copper prices generally contracted in 2023 due to tighter monetary policies, slower-than-expected economic growth in China, and weak performances in other regions.

Demand for copper in Europe (-4% YoY) and North America (-2% YoY) weakened alongside the sluggish economic growth. Slower-than-expected demand growth in China (+5% YoY), coupled with increased imports of concentrates and scrap due to the launch of new refining capacity, caused a rise in global exchange stocks, although they are still at historically low levels. Globally, Nornickel expects a 2% global copper demand growth in 2023, followed by a rise to 3% in 2024.

On the supply side, mine supply is expected to increase by 2% in 2023 and 3% in 2024 as the commencement of projects like Quebrada Blanca Phase 2 in Chile and Oyu Tolgoi in Mongolia, the first concentrate production from Udokan (Russia) and debottlenecking program at Kamoa Kakula (DRC), take place. At the same time, the refined production rises by 4% and 2% in 2023-2024, respectively on the back of new refining capacities launches in China. Mine disruptions will remain at a level of around 5.5%, which is close to the historical average.

As a result, Nornickel expects the refined copper market to be relatively balanced in both 2023 and 2024.

However, in the long term, there is a need for more new mining projects to prevent shortages of copper as demand rises due to advancements in transport electrification, the expansion of renewable energy, and the concurrent development of electricity grids.

PGMs

Over the six months since the previous report, PGM prices followed a downward trend, as palladium was suffering from destocking by automakers and fabricators, while platinum price was also falling as risks of South African primary production cuts, caused by electricity undersupply, were not realized. Moreover, macroeconomic sentiment continues to pressure commodity prices, as financial regulators of major world economies remain hawkish.

Palladium demand is expected to marginally fall by 1% YoY in 2023, as ICE-powered vehicles production growth and continuing hybridization will be offset by falling demand in electronics and residual palladium-with-platinum substitution, launched in previous years amid significant price spread. The peak level of substitution has been reached this year, as narrowed price spread leaves no incentives for a short-term substitution and, moreover, some automakers have already started to commit for reverse platinum-with-palladium substitution for the mid-term.

Historically record high net short positions coupled with metal destocking by automotive companies and fabricators (which, in Nornickel's view, is coming to end) have been pressuring palladium price since the end of 2022, which, along with supply chain disruption led to a 15% YoY secondary production fall in 2023.

Moreover, given current precious metals prices major PGM projects in South Africa and North America are expected to incur financial losses next year (and some already became loss-making at current prices) if they opt to sustain current production levels. Hence, the company expects supply cuts in 2024 if the current price environment persists.

Nornickel has revised the 2023 palladium market deficit from −0.2 Moz to −0.9 Moz as it has reviewed the secondary supply from +9% growth down to 15% fall, while slightly lower than expected primary production from North America will be offset by weaker electronics demand. The 2023 production/consumption deficit was generally covered by the release of stocks by demand-side market participants.

As for the platinum market, the company expects it to flip into the fundamental deficit this year. The increase of primary supply, mainly attributed to resilience of South African mining companies to electricity disruptions, will not be enough to offset rising automotive and industrial demand for platinum, as well as lower recycling. Nornickel sees platinum market to record −0.4 Moz deficit this year, comparing to its previous view of balanced market due to lower secondary supply.

As for 2024, Nornickel expects palladium deficit to narrow down to −0.4 Moz amid secondary supply recovery, while platinum market will be relatively unchanged at −0.3 Moz, as recycling volumes recovery will be offset by increase in industrial demand of glass and electronics sector. However, the company's analysts see significant risk from the primary supply of South Africa and North America amid potential cost optimisation at low margin projects.