UPDATE 2-Russia's Nornickel says its fund buys palladium from central bank

* Nornickel’s fund bought 5 T of palladium in 2016

* Aims to buy not less than 5 T in 2017

* Nornickel could consider a Eurobond issue soon (Adds details, quotes from CFO)

MOSCOW, March 16 (Reuters) - A fund created by Norilsk Nickel (Nornickel) buys palladium from Russia’s central bank reserves to help meet demand from its customers, the world’s largest producer of the metal said on Thursday.

Demand from Nornickel’s customers is higher than its production of palladium, a metal used mainly in emissions-curbing auto catalysts, Vladimir Potanin, Nornickel’s chief executive and co-owner, told reporters in Moscow.

“The central bank enables us to close this deficit,” Potanin said, adding the company only used the central bank’s reserves to fill orders, and not for stockpiling.

Nornickel’s Global Palladium Fund bought 5 tonnes (around 160,000 troy ounces) of palladium in 2016 at market prices, Chief Financial Officer Sergey Malyshev said.

Purchases were made from Russia’s central bank and other suppliers, he said, adding the Fund would buy at least 5 tonnes of palladium in 2017.

Nornickel created the fund in 2016 to develop relations with holders of existing metal stockpiles, with a commitment for potential transactions of up to $200 million.

The central bank, which holds one of the world’s largest gold and foreign exchange reserves, did not provide an immediate comment. The size of its palladium stock is a state secret.

“We believe that the fund’s activity in future will be focused on easing of market volatility and increasing of demand from large industrial consumers,” Malyshev said.

Potanin also said Nornickel could consider a Eurobond issue in near future as the company could restructure a part of its debt.

Talking about other Nornickel projects, Malyshev said Chinese investor Highland Fund had not used its pre-emption right to buy a 40 percent stake in the Bystrinskoye gold and copper mining project in Siberia.

He also said CIS Natural Resources Fund, a Russia-focused natural resources fund established by Potanin and his partner, would decide by the end of 2017 whether to go ahead with a proposed purchase of 39 percent of the project. (Reporting by Katya Golubkova and Anastasia Lyrchikova; additional reporting by Polina Devitt and Elena Fabrichnaya; Writing by Polina Devitt; Editing by Greg Mahlich and Mark Potter)