Nornickel and China Copper Consider Joint Venture for Copper Plant

Norilsk Nickel (Nornickel) and Chinalco (SHA:601600) subsidiary China Copper are considering a joint venture, sources familiar with the matter told Reuters.

The move would let Nornickel relocate its copper smelting operation to China amidst London Metal Exchange (LME) restrictions on Russian metals that began in April. The company currently stores a significant amount of its metal on the LME.

Nornickel had previously announced plans in April to close its Arctic copper facility and establish a new plant in China with an unnamed partner.

China Copper was the only party interested in a joint venture with Nornickel because of its position as a subsidiary of the central government-managed Chinalco. The state-owned Chinese copper producers Nornickel approached didn't want to engage with a foreign company without central government approval.

Executives from China Copper visited Moscow in June to negotiate the venture.

The proposed plant, expected to be operational by mid-2027, will process around 2 million metric tons of copper concentrate annually, supplied by Nornickel. Potential sites for the new plant include Fangchenggang and Qinzhou in Guangxi, as well as Qingdao in Shandong province.

The new facility is said to have the capacity to produce 450,000 metric tons of copper annually, which would account for approximately 2 percent of global mined copper supply. Last year, Nornickel produced 425,400 metric tons of refined copper, all processed at its Arctic plant.

The decision to relocate operations also aligns with the company's strategy to produce copper in China, the largest consumer of the metal, which is heavily used in power and construction industries.

Despite the absence of direct US or European sanctions on Nornickel, many Western consumers have been avoiding Russian metals due to the geopolitical climate.

In April, the LME banned the trading of Russian metals produced on or after April 13, 2024, to comply with new US and UK sanctions imposed in response to Russia's invasion of Ukraine.

The LME’s ban on Russian metals has further complicated Nornickel’s ability to sell its products in traditional markets. Under the new LME rules, Russian metal produced before April 13, 2024, can still be traded, but new production is prohibited, affecting Nornickel's storage and sales channels.

These sanctions, aimed at restricting revenue from Russian metal exports and effectively limiting the funding for its military operations against Ukraine, include aluminum, copper and nickel.

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Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.