Palladium deficit to widen, nickel outlook neutral – Nornickel

JOHANNESBURG (miningweekly.com) – Palladium consumption is heading for an all-time high of 10.8-million troy ounces, which will leave the market in a deficit of more than one-million ounces in 2017, according to the world’s largest producer of the precious metal.

Russia’s Nornickel said on Tuesday that it retained a positive outlook for the palladium market, on the back of continuing demand growth from the automotive sector and a lack of new primary supply.

The miner stated that capital investments of major platinum group metal producers in South Africa were at a six-year low and cited the new South African Mining Charter as a potential disincentive for major capital investments.

On the demand side, rising personal incomes in emerging markets are boosting the global car fleet, while the market share of diesel cars, primarily in Europe and India, is falling. Tightening environmental standards in major car producing regions are further drivers of palladium consumption.

Nornickel, which published its interim results on Tuesday, reduced its 2017 deficit forecast for nickel from 100 000 t to a deficit of 45 000 t, owing to higher ore exports from the Philippines. The group noted, however, that supply uncertainty from the South Pacific region had not been completely removed.

Palladium was the mining company’s best-performing commodity in the first half of 2017 and is now also the largest contributor to group revenue. Palladium accounted for 30% of total revenue, followed by nickel sales at 27%.

Palladium earned Nornickel $1.17-billion in revenue, nickel sales generated $1.06-billion, copper sales $1.02-billion and platinum $299-million.

Consolidated revenue increased by 11% year-on-year to $4.2-billion in the first half of 2017, mainly owing to higher metal prices. Earnings before interest, taxes, depreciation and amortisation (Ebitda) decreased by 3% year-on-year to $1.7-billion, although the Ebitda margin was maintained at 41%. Net profit fell sharply from $1.30-billion in the first half of 2016 to $915-million.

Meanwhile, Nornickel president Vladimir Potanin commented in the management discussion accompanying the group’s results that Nornickel’s capital expenditure would be $2-billion in 2017.  He noted that the Bystrinsky copper project had entered completion phase and that it would be launched by the end of the year.

“In May, Talnakh concentrator was fully ramped up having reached its target throughput capacity and designed parameters marking an important milestone in the execution of a key investment project of downstream reconfiguration and production assets modernization. With the improved quality of concentrate, expanded metallurgical capacities of Nadezhda plant and Kola refinery, the company has managed to fully compensate for the retired metallurgical assets of the nickel plant decommissioned last year. As a result, we have been able to significantly reduce the low-margin processing of the third-party feed,” he commented.