Nornickel expects negative hit from high interest rates, trade wars

Russian mining giant Nornickel said on Friday it expects its financial results to deteriorate this year under pressure from low metals prices, high interest rates, the strong rouble and global trade wars.

Nornickel, the world’s largest palladium producer and a major producer of refined nickel, is not directly subject to Western sanctions against Russia. But the sanctions have caused payments issues, restricted its access to Western equipment and prompted some Western producers to avoid buying Russian metal.

“This year, extremely high geopolitical uncertainty, continued volatility in target markets against the backdrop of escalating trade wars, risks of a slowdown in global economic growth rates, as well as tight monetary policy, are continuing to have a significant negative impact on the company’s financial indicators,” CFO Sergey Malyshev said at Nornickel’s annual shareholder meeting.

The company is also contending with low metals prices due to the rouble’s strengthening this year, and with inflation and the high cost of servicing its debt, Malyshev added.

Government officials and major business leaders have highlighted the Bank of Russia’s 20% key rate as a crucial drag on the economy, which is set to slow sharply this year.

Malyshev said the difficult conditions were forcing Nornickel to reduce investments and put some projects on hold. The company’s board last month recommended against paying dividends on Nornickel’s 2024 results.

“We consider it inappropriate to pay dividends by increasing the level of debt,” Malyshev said.

Nornickel’s vice president Anton Berlin told reporters that the company expected a balanced market in palladium in 2025 and an oversupply in nickel. He said that the auto industry, a major consumer of metals, was still in crisis.

Berlin blamed Indonesia, the world’s biggest nickel producer, for flooding the global market with cheap nickel, harming other producers. Nornickel earlier estimated that about 40% of nickel producers are loss-making at the current price.

“We are seeing an oversupply of this metal, and this leads to price pressure, because unlike most other regions, in Indonesia everything is organised in a relaxed manner in terms of mining,” Berlin said.

Berlin said Nornickel was hoping that global trade disputes would not impact its export volumes and that the company aims to sell everything it produces.

(By Anastasia Lyrchikova and Alexander Marrow; Editing by Mark Trevelyan and Louise Heavens)