Ufaleynickel Plant, acquired by Binbank due to its debts, is on the verge of closing due to low nickel prices and high production costs. To break even, the company needs the price of not less than $14.5 thousand per ton of metal, whereas now it is a little more than $10 thousand. The Bank and the local authorities are looking for investors, if not the production itself, then at least for the manufacturing site. 

The second Russian producer of nickel, Chelyabinsk-located Ufaleynickel Plant, plans to suspend production due to losses, "which are covered by credit", as informed the press service of the governor Boris Dubrovsky following a meeting on February 4 with the owners and management of the plant and its creditors (names and company names are not given). The plant is unprofitable due to the depletion of the resource base, low nickel prices and increased cost of coke (40% of the cost), the report said. Sources of Kommersant in the industry previously noted that the nickel contents in the Serovsky mine owned by the plant is only 0.8-0.9 grams per ton.

The plant capacity is 15 thousand tons of nickel a year, in 2016 it produced about 10.2 thousand tons of metal (more than 90% is exported). Revenues for the nine months are 4.8 billion rubles, losses amount to 1.4 billion rubles, long-term debt is more than 13 billion rubles. Lenders were not disclosed, but earlier sources of Kommersant said that the main one was Binbank (part of Safmar Group owned by the Gutserievs-Shishkhanov family).

In the same group with Ufaleynickel is Rezhnikel and Serovsky mine (both in the Sverdlovsk region). Since the end of 2011, these assets belonged to Highmetals KDS owned by the Timofeyev brothers (bought them them from the Zubitsky's family), but in 2015, as Kommersant's sources say, the company was transferred to the structures acting in the interests of Binbank due to its debts. At the end of 2016, 98.71% stake in the plant belonged to four Cypriot companies whose beneficiaries are not disclosed, but its board of directors, for example, includes Eriskhan Kurazov, CEO of logistics group of the MLP, owned by Safmaru. The management company for all three nickel assets is Rusnikel with a nominal shareholder (periodically changed).

The stop at Ufaleynickel can follow the already announced reduction in output for one year and sending a third of employees to the idle regime, as well as temporary stop of Rezhnikel. Ufaleynickel in late January, told Interfax that "the minimum price of nickel sufficient to service the current credit obligations companies maturing in 2024, is $14.5 thousand per ton." Now the futures price of nickel for delivery in three months on the LME is.$10,2 thousand per ton.

According to the governor of the region, "the owners and creditors" of Ufaleynickel "are in search of a strategic investor who will be able to maintain and develop the current production before reaching the break-even point, or a group of companies which is ready to expand its activities on the production site of the company." At the meeting of February 4 the topic was discussed with representatives of eight companies (not named). Rusnickel's phone has never answered since 2015. Binbank didn't tell Kommersant, what investors were being negotiated with, noting that "all options are being worked out to save the plant in the current situation." Norilsk Nickel (produced 235.75 thousand tons of nickel in 2016) told Kommersant that the opportunity to invest in the plant is not considered.

The strong growth in nickel prices is unlikely, said Andret Lobazov at Aton: for this to happen a major change in the balance of supply and demand is needed. For example, the government's decision to suspend work on the mines in the Philippines should remove a significant portion of the ore supply from the market, and the decision of Indonesian authorities to allow the export of ore should be nominal and would not affect the delivery.