Russian mining giant Nornickel is exploring a joint venture with China's Xiamen C&D to process copper in China, according to media sources. This move comes as Nornickel faces challenges with equipment imports to Russia due to sanctions and seeks alternative solutions for its copper production.

The discussions center around Nornickel acquiring a stake in an existing smelter in China, rather than building a new facility from scratch as previously planned. The specific smelter under consideration is Yanggu Xiangguang Copper, a majority-owned subsidiary of Xiamen C&D located in Shandong province.

ChemAnalyst reached out to both the companies for comment but didn’t receive any confirmation till the time of writing this news.

This potential partnership would address several key issues for both companies. Nornickel has struggled to import equipment needed for copper processing in Russia due to sanctions imposed following the invasion of Ukraine in February 2022. In April, they announced plans to close their Arctic copper smelting facility and build a new one in China by 2027. Acquiring a stake in an existing smelter would significantly accelerate this process.

For Xiamen C&D, the deal presents an opportunity to secure a guaranteed supply of copper concentrate for their Yangguang smelter. The Chinese copper smelting sector has been facing pressure due to low processing fees and excess capacity. Xiangguang currently operates at just 60-80% capacity and relies on concentrate from various sources. A dedicated supply from Nornickel would provide stability and potentially improve profitability.

However, there are also potential risks associated with the deal. The copper produced at Xiangguang using Nornickel's concentrate would likely not be deliverable on the London Metal Exchange (LME) due to the LME's ban on Russian metal produced after April 13, 2022. While Nornickel is not directly sanctioned, many Western companies have self-sanctioned by avoiding business with Russia. This could limit the potential market for the finished copper product.

Another hurdle is the need for technological upgrades at Xiangguang. Nornickel's copper concentrate contains nickel and platinum group metals, requiring the smelter to be modernized to handle these additional elements effectively.

Overall, the potential joint venture between Nornickel and Xiamen C&D reflects the ongoing impact of sanctions on the global metals market. While Nornickel seeks alternative solutions for its copper production, Chinese smelters like Xiangguang are looking for ways to secure feedstock and improve profitability. The success of the deal will depend on navigating the logistical and technical challenges, as well as finding new markets for the finished copper product.