FT Alphaville doesn’t tend to follow the nickel market too closely, but the research from Goldman Sachs on Thursday did strike us as interesting (our emphasis):
2012 nickel market summary: Weak demand growth and lower input costs As background, nickel underperformed in 2012, starting the year at $18,910/t, rising to $21,700/t in early February, and finishing the year at $16,998/t, declines of 10.1% and 21.4%, respectively. Overall nickel prices averaged $17,536/t in 2012, down 23.4% yoy from 22,900/t in 2011. Price weakness reflected a combination of soft global consumption growth set against significantly higher low-cost nickel pig iron supply in China, and, importantly, a shift down of the nickel cost curve in 2H2012 (largely reflecting lower energy and nickel ore input prices).
Norilsk Nickel, the world’s biggest nickel producer, said on Thursday it had rejected an offer from Glencore, to buy the company’s entire nickel production in a deal that would have given the world’s largest commodities trader control of nearly half the global trade in the metal, reports the FT. Norilsk said the deal would have had “negative economic and non-economic effects” on the company. Disclosure of the offer comes amid a power struggle between Norilsk’s two key shareholders, Oleg Deripaska and Vladimir Potanin, for control of the company. Reuters reports on Friday that Potanin has raised $2bn from state bank Sberbank to repay his 2008 state rescue package, after the bank joined last month in a $4.5bn refinancing for Deripaska.
Time is running out for Russia’s richest man on paper to secure more than $2bn in financing to repay part of a $4.5bn loan to western banks before the end of October or hand to creditors a 25 per cent stake in the world’s biggest nickel miner. Oleg Deripaska’s race to meet creditors’ calls – or face the forced divestment of the stake in Norilsk Nickel – highlights the pressure on his vast empire amid the global credit crisis and worsening commodities prices. The FT’s Lex column says the the five-year commodity boom was just another asset price bubble after all.