Russia Ufaleynickel halts output on low prices

YEKATERINBURG, Russia, Oct 27 (Reuters) - Ufaleynickel, Russia's third-largest nickel producer, said on Monday it had stopped production of the metal due to a fall in world prices and planned to sack some 400 employees.

Pavel Kovalenko, the spokesman for the plant's owner, the Industrial and Metallurgical Holding, said that the plant had already sent some 300 employees on partially paid holiday and intended to do the same with another 1,000 this week.

"We have started negotiations with the plant's trade union and employees on laying off some 400 staff," Kovalenko said.

"The cost of the plant's production is significantly higher than the price of the metal on the world markets. It costs us $26,000 to produce a tonne of nickel, and its current exchange price is around $8,000."

Nickel MNI3 fell by 6.5 percent in London on Monday to $9.350 per tonne.

In May, Ufaleynickel said it aimed to produce 14,000-16,000 tonnes of nickel in 2008 compared to 14,144 tonnes last year.

Ufaleynickel used to refine cobalt for Russian metals giant Norilsk Nickel (GMKN.MM) for a fee. But Norilsk stopped using Ufaley's services after March 2007, when it agreed to supply practically all its cobalt to U.S.-based OM Group (OMG.N). (Reporting by Natalya Shurmina, writing by Aleksandras Budrys, Editing by Peter Blackburn)