Nornickel, the world’s largest producer of palladium and a major supplier of refined nickel, has reported a sharp decline in its output of both metals in 2023 and expects a further drop in 2024 due to geopolitical tensions and delayed furnace repairs.
The Russian company, which operates in the Arctic region, said its nickel production fell 5% year on year to 209,000 metric tons in 2023, and forecast a range of 184,000-194,000 tons for 2024.
Palladium output, which accounts for about 40% of the global market, dropped by 4% in 2023 to 2.692 million troy ounces, and is expected to fall to 2.296-2.451 million troy ounces in 2024.
Nornickel had anticipated lower output for both metals in 2023, but palladium production exceeded its guidance.
Sanctions and Supply Issues
Nornickel’s CEO Vladimir Potanin said last year that sanctions had constrained the company’s development, as Western governments have imposed various measures against Russia over its role in the conflict in Ukraine.
Foreign suppliers have been difficult for Nornickel to secure equipment and technology from, as well as accessing international financing. However, the company has not been directly targeted by the sanctions.
The company also said it had postponed the capital repairs of the flash smelting furnace #2 at Nadezhda Metallurgical Plant for two years due to issues with the delivery of equipment. The repairs scheduled for mid-2024 will affect the output of all key metals, except platinum.
Platinum and Copper Shine
Nornickel’s Senior Vice-President and Operational Director Sergey Stepanov said the company’s mines had recovered to the planned volumes in the fourth quarter of 2023, after testing and rolling out new equipment from alternative suppliers.
He also attributed the 2% rise in platinum output in 2023 to higher processing volumes of platinum-rich concentrate purchased from third parties.
Higher metal grades and processing volumes, as well as the launch of the Talnakh concentrator after modernization, supported the 3% increase in copper production to 499,000 tons in 2023.
Nornickel said it expected copper output to grow to 505,000-525,000 tons in 2024, while platinum output would decline to 567,000-605,000 ounces.
Outlook and Opportunities
Despite the challenges, Nornickel maintains optimism regarding its core metals. The growing electric vehicle and hydrogen fuel cell markets, as well as the recovery of the automotive industry after the pandemic, are driving the demand for nickel and palladium.
The company also said it was exploring opportunities to expand its presence in the African continent, where it has a stake in the Tati nickel project in Botswana and a joint venture with African Rainbow Minerals in South Africa.
After a series of accidents and spills in 2020-2021 that damaged its reputation and resulted in hefty fines and compensation payments, Nornickel committed to improving its environmental and social performance.
The company said it had invested more than $1 billion in environmental projects in 2023 and planned to spend another $1.4 billion in 2024, as part of its long-term goal to reduce its emissions and waste by 2030.
Source: Reuters
