UPDATE 1-Indonesia nickel ore ban may dent China's stocks-Norilsk

Fri Jan 17, 2014 6:11am EST

Related Topics

* China is the world's largest producer of nickel pig iron

* Russia's Norilsk is the world's top producer of refined nickel

* Norilsk sees write-offs in H2 2013 financials, to repay $1.1 bln 2014 (Adds details, quotes, context)

MOSCOW, Jan 17 (Reuters) - Indonesia's ban on nickel ore exports may lead to a fall in Chinese stocks of the material later this year, Russia's Norilsk Nickel, the world's largest producer of the metal, said.

A long-expected ban on Indonesian ore exports came into force at the weekend as part of Jakarta's policy to force companies to build processing plants.

The ban is expected to increase costs for Chinese makers of nickel pig iron who use Indonesian raw material to produce a low-cost alternative to refined nickel. Prices for refined nickel have surged more than 5 percent in London this week.

"It was an event, which everybody was expecting thanks to the role which China is playing on the nickel market," Sergey Malyshev, Norilsk head of economy and finance, told reporters on Thursday. Malyshev's remarks were approved for publication on Friday.

Indonesia's nickel production will decline by 84 percent from last year to 9 million tonnes this year, the chief economic minister said on Thursday, as a ban on nickel ore hits output from the world's largest exporter.

Many analysts, however, expect refined nickel prices to remain capped by a weak stainless steel market, a surplus of nickel this year and adequate stockpiles of nickel ore in China.

Asked whether the global nickel market would turn to a deficit due to the ban, Malyshev said that everything would depend on China's stocks of ore.

"In a quarter it will become clear how this decision will affect ore stocks in China, and towards the end of the year it will become clear how much these stocks have decreased," he added.

To cope with weak metals prices, Norilsk trimmed spending last year, focused on its lucrative assets in Russia's Arctic and cut the portion of short-term debt in its portfolio.

Its first-half 2013 earnings were hurt by $636 million of non-cash write-offs mainly related to its investment in state electricity holding firm InterRao.

In its earnings for the second half of 2013 which the company plans to publish during the first ten days of April, Norilsk expects write-offs related to its electricity assets to be significantly lower, Malyshev said.

The company's net debt totalled $5 billion at the end of 2013 with $6.3 billion of total debt. In 2014 Norilsk, controlled by Russian tycoon Vladimir Potanin and aluminium giant Rusal, should repay $1.1 billion of debt, the CFO added. (Reporting by Polina Devitt; Editing by Douglas Busvine and Megan Davies)

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