Norilsk sees nickel stockpiles up

(Reuters) - Global nickel stockpiles are now rising slightly after declining for over a year-and-a-half, putting pressure on prices, according to Norilsk Nickel (GMKN.MM), the world's largest nickel and palladium producer.

If in the past year to year-and-a-half they were declining, that has now stopped," chief executive Vladimir Strzhalkovsky said on Monday at the Reuters Russia Investment Summit.

"And, they have started to increase by a tiny, barely noticeable amount. It is about 1-3 percent in the past month and a half."

The metal, a key component of stainless steel, closed at$21,575 per tonne on the London Metal Exchange, off 12.8 percent since the start of the year.

The chief executive said that if prices decline by a further $2,000-$3,000 per tonne some producers could cut output, while Norilsk would remain profitable.

"Production costs in many countries are $17,000-$18,000. ..maybe they will consider cutting production, but they certainly won't increase output, it makes no economic sense."

Chinese nickel stockpiles are a risk factor for prices, as Strzhalkovsky said they could be released at below-market prices to support domestic producers.

"By all appearances, the situation in China is difficult and dangerous since it built up a reserve of metals and it is difficult to guess what the government will do with this," he told the summit, held at the Reuters office in Moscow."

The 57 year-old former deputy minister of economic development and trade has been at the helm of Norilsk Nickel for the past three years, navigating through the long-running shareholder feud between tycoons Oleg Deripaska and Vladimir Potanin.

The miner, which has its core operations in the Arctic city of Norilsk, has enjoyed resilient metals prices despite sharp declines on global stock markets in August following negative economic data from the U.S. and continued concern over Eurozone debt.

Strzhalkovsky also said Norilsk Nickel likely achieved a first half net profit of $2.5 billion on core earnings of $3.5 billion.

"The company is working stably and confidently.preliminary results show that our financials are at roughly last year's level, with net profit a bit above $2.5 and EBITDA a bit above $3.5."

A year ago, Norilsk Nickel reported first half net profit of $2.35 billion and earnings before interest, taxation, depreciation and amortization (EBITDA) of $3.37 billion.

MINING CONGLOMERATE

While Norilsk Nickel supplies roughly 50 percent of global palladium demand and about 20 percent of the nickel market, it is also a major producer of copper and platinum.

Strzhalkovsky said that copper prices are unlikely to rise above the $9,000 per tonne level.

"A few traders who are active in Russia say copper will be at 12 or 13 (thousand dollars per tonne), but I don't see it. The price is about 9 now and I think that is a good price," he said.

In the first half of 2011, Norilsk Nickel mined 184,430 tonnes of copper and 360,000 troy ounces of platinum.

Strzhalkovsky said the white metal's current discount to gold is not justified, given platinum's scarcity and greater range of industrial applications.

"In the past, a proper price differential was about 20 percent, with platinum above gold, but this has been eliminated. However, there is far less platinum in the world, and it also has industrial applications, while gold's use is more limited."

At 1659 GMT, platinum traded at 1,803 per ounce, while spot gold was at 1,813 per ounce.

(Reporting By Alfred Kueppers; Editing by Andrew Callus)