| World nickel prices are reducing the profit of Norilsk Nickel MMC Norilsk Nickel yesterday published net profit for the third quarter of this year. Compared to the same period last year, profit decreased by 13% and reached 14.5 billion rubles. Norilsk Nickel explains the decline in quarterly profit by fluctuations in metal prices (for nickel they fell by 20%), assuring that the company has no changes in production and sales volumes.
As the company previously reported, total nickel and copper production in the third quarter remained almost at last year's level - 61 thousand tons and 113 thousand tons, respectively. In just nine months since the beginning of the year, the company produced 181 thousand tons of nickel and 338 thousand tons of copper. The company's annual plans also do not change: production is expected to be 240--245 thousand tons of nickel (245 thousand tons in 2004) and 440--450 thousand tons of copper (447 thousand tons).
Only the market situation has changed. While last year showed positive price dynamics for nickel, this year has turned out to be much more difficult, and now nickel prices are trending downwards. This is primarily due to a decrease in demand - the Chinese government, struggling with the overheating of the country's economy, has reduced, in particular, the production of stainless steel.
In fact, for the first time in the last three years, nickel prices on the market have changed noticeably. At the beginning of this year, three-month nickel futures were trading on the London Metal Exchange (LME) at approximately $15,000 per tonne. By February, there was a decline to $14 thousand, and then growth began, which slowed down after reaching $16 thousand by the end of February. Minor fluctuations followed, and by mid-summer prices exceeded $16.5 thousand per ton. Then a rapid decline began, and by the end of October the price of nickel dropped below $12,000. For the past two years, due to global economic factors and mainly due to increased stainless steel production and the development of the Chinese economy, nickel has been trading close to its maximum level of $18 thousand dollars per ton, which was achieved at the end of 2003. And analysts did not expect the price of nickel to fall in the medium term. Their forecasts were based on the fact that the market, even at high prices, was not satisfied with the volume of nickel supply, and the launch of new capacities in this industry was not expected in the coming years. In addition, the reserves of metal in the exchange warehouses were not too large. But soon the production of stainless steel in China decreased, prices for steel and then nickel fell.
But it seems that Norilsk Nickel is coping with the situation quite well. The company recently announced that its board of directors recommended that shareholders approve an interim dividend for nine months of RUB 43. per share (a year earlier they were 41.4 rubles per share). This most likely means that, despite the disappointing results in the third quarter, the company's profit still grew over the nine months. Norilsk Nickel promises to publish financial results for this period in the very near future. Anna LANDER |
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