Nornickel, the world's largest refined nickel and palladium producer, has been selling metal to China this year based on prices from both the London Metal Exchange (LME) and the Shanghai Nickel Futures Exchange (SHFE), according to anonymous insiders. Volumes based on SHFE prices are paid in renminbi, indicating that the company is looking to increase sales to China this year to make up for the loss of the European market. The company supplies about 7% of the world's nickel production and hopes to tie long-term contracts to Shanghai prices. Negotiations for long-term contracts are ongoing and could include a combination of LME and SHFE prices.
China, as the world's largest consumer of commodities, has long sought more control over pricing. Much of the world's commodity trade is still based on global benchmark prices in dollars, but some time ago Chinese authorities suggested switching to SHFE prices because they consider them a more stable benchmark than the LME. Last year the LME suspended nickel trading for a week because of a massive squeeze on short positions.
Although the U.S. and U.K. imposed sanctions against Potanin, Nornickel's main shareholder and president, the company and its exports were not affected by the bans and restrictions.
In January, the company announced that it would carry out maintenance, postponed last year due to problems with equipment supplies. As a result, nickel production is expected to be down 4-5% from 2022. The company will also change its logistics chain, targeting more friendly countries, primarily China, Turkey, Morocco and Arab countries.
Overall, Nornickel's decision to sell metal based on LME and SHFE prices is a strategic step aimed at strengthening its position in the Chinese market.
