Russian Nornickel: Closing Arctic Plant, Opening China Facility Amidst Sanctions

In a strategic move amidst sanctions and shifting market dynamics, Russia’s mining giant Norilsk Nickel (Nornickel) announced its intention to shutter its Arctic copper plant in Russia and inaugurate a new facility in China.

This development aims to secure direct access to the world’s largest metals market, China, grappling with the repercussions of sanctions and evolving consumer preferences.

The initiative comes as Nornickel faces impediments in importing equipment to its operations in Russia due to sanctions. Vladimir Potanin, CEO of Nornickel, emphasised the rationale behind the move, citing the need to address various operational challenges including environmental concerns, market access limitations, and customization requirements.

Potanin articulated the company’s strategy to relocate these challenges to China, where they anticipate more efficient resolutions.

Nornickel’s proposed venture entails the establishment of a joint venture in China to construct the new copper plant, slated for completion by mid-2027.

The facility is expected to receive approximately 2 million metric tons of copper concentrate annually.

This strategic shift aligns with China’s significance as a primary market for Russian commodities, particularly amid escalating sanctions pressure. Notably, Asia accounted for 54% of Nornickel’s revenue in 2023.

Furthermore, Nornickel intends to forge partnerships to venture into battery production, leveraging Russian lithium deposits and collaborating with state nuclear corporation Rosatom.

However, plans for a joint project with German chemicals group BASF in Finland have been halted, citing permitting issues from Finnish authorities.

The decision to relocate operations to China underscores the profound impact of sanctions on Russia’s non-ferrous metals sector.

While Nornickel has not been directly targeted by Western sanctions, the company has encountered challenges due to foreign vendors’ reluctance to supply to Russia.

The recent imposition of sanctions by Washington and London on metal-trading exchanges, prohibiting the acceptance of new aluminium, copper, and nickel produced by Russia, further exacerbated the situation.

Potanin highlighted the adverse effects of sanctions on Nornickel’s revenue, indicating a significant shortfall compared to pre-sanctions levels.

Despite not being directly targeted, Nornickel, like other Russian raw materials producers, faced customer refusals and pricing pressures, necessitating unconventional strategies to maintain market presence.

Image: By Andrey Kuzmin – Own work, CC BY-SA 4.0, https://commons.wikimedia.org/w/index.php?curid=110247162