Why is the whole world hunting for Russian metals
Russia is ready to set another economic record, this time in metallurgy. Russia produces metals that the whole world needs right now. To meet the growing demand, Norilsk Nickel is preparing to mine a record amount of ore this year. Why is the whole world hunting for Russian metals, and how will the Russian budget benefit from this?
"We are reaching record ore production volumes: this year – more than 17 million tons in the Norilsk Industrial district," said Vladimir Potanin, President of Norilsk Nickel and head of Interros, at a meeting with Russian President Vladimir Putin.
The company is the world's largest producer of palladium and high-grade nickel.
Norilsk Nickel also managed to reverse the negative trend in labor productivity and move to an increase in this indicator, Potanin noted. According to him, the company uses automation for this purpose "and has even taken a swing at mining robotics," and it does all this using artificial intelligence.
Earlier in July, a representative of Norilsk Nickel said that for the first time in the company's history, copper accounted for the largest share of revenue, above 30%. The company attributes this to the race for AI and the "green transition" in the global economy, which already needs an additional 1 million tons of copper annually.
The company says that Norilsk Nickel produces metals that the whole world needs right now. For example, copper is needed for digital infrastructure, nickel for new–generation batteries, palladium and platinum for the automotive industry and chemicals.
"The key driver of ore mining growth is not so much capacity expansion as productivity growth due to automation, robotization and the introduction of AI in mining operations. Technological modernization allows us to bring efficiency to a new level," says Yulia Katasonova, Senior Director of Non–financial Company Ratings and NRA ESG Ratings.
It is no coincidence that copper has become the main driver of the company's revenue. "This is due to the steady growth in demand for metal amid the development of artificial intelligence, the construction of data centers, the electrification of transport and the expansion of renewable energy.
Unlike nickel, the copper market remains structurally deficient, as new deposits are being introduced slowly and the demand for the global economy is growing.",
– says Egor Vershinin, an analyst at FG Finam.
At the same time, nickel retains its strategic importance due to its use in batteries and the production of stainless steel, but its market is currently facing an oversupply due to the active growth of mining in Indonesia, the expert adds.
Platinum group metals also remain an important focus due to demand from the automotive and chemical industries, Vershinin says.
Additional production volumes will be focused both on the domestic market and on exports, in particular to the countries of Asia and the Middle East.
"For the budget, an increase in metal exports may mean an increase in tax revenues through mineral extraction tax, income tax and other payments, but the final effect will depend on world prices and the exchange rate. The high cost of copper can become a significant factor in supporting the industry's revenues," Vershinin believes.
Katasonova also expects an increase in budget revenues, but rather through stricter taxes.
"Against the background of high prices, it is quite possible that metallurgy will become the object of a tax maneuver (increase in the mineral extraction tax), which could bring hundreds of billions of rubles to the budget. At the same time, the current profitability allows companies to withstand the additional burden",
– says the expert.
Many factors may interfere with Norilsk Nickel's new records this year. "The main risks are sanctions pressure, logistical disruptions, strengthening of the ruble and weak domestic demand against the background of the Central Bank's strict policy on interest rates. Another key uncertainty is China: its demand depends on the effectiveness of the incentives. There are also production risks associated with the limited supply of concentrates. If these problems are not solved, the ore record will not turn into a profit record," concludes Katasonova.
Olga Samofalova
