Nornickel expects temporary equipment, parts disruption in autumn, working on replacing them in Russia, China

MOSCOW. March 15 (Interfax) - Nornickel expects temporary disruption with European and American equipment and spare parts in the autumn but is working on replacing this with Russian and Chinese alternatives, Operational Director Sergei Stepanov said during a live line hosted by Nornickel's management."

The company acknowledges that difficulties with access to equipment and components may force it to reschedule a number of investment projects.

The company is currently working with the world's best underground equipment, but the situation may change due to the restrictions on traditional suppliers for shipping components to Russia.

"We'd not be telling the truth if we said there were no risks of supply disruption, temporary freezing ... We need to be flexible, to look at Russian and Asian equipment and spare parts suppliers," Stepanov said.

Such equipment will not be as efficient, "but perhaps in the next one or two years we will have no other options to support production," he said.

Nornickel has stockpiled enough spare parts for its main elements to last three months, Stepanov said.

"There might be a difficult period in August-October. In a year, we will know what alternatives work, and production in Russia will adapt for us. But the transition period, where we run out of stockpiled spare parts but the supply chains to replace them have yet been established, will be difficult," he said.

"Some 70% of the equipment and spare parts we need are produced in China. Not all of this was used before because it was not necessary. We will find all the necessary replacements in a year or two," he said.

Severing ties with traditional equipment and components suppliers of may lead to some investment projects being rescheduled, said Sergey Dubovitsky, Senior Vice President Strategy, Strategic Projects, Logistics & Procurement

"It is possible that some technical solutions will be reviewed, and some projects redesigned. We do not rule out that some of our investment plans will be adjusted in terms of project schedules," he said.

"It would not be fair to say that nothing has changed. There are challenges in terms of supply chains and working with our traditional suppliers. As with in sales, we are keen to maintain all contracts and chains. But there are certain risks that are forcing us to look at both alternative supply routes and alternative equipment suppliers: Russian, Asian," Dubovitsky said.

Investment priorities will be modernizing and improving the reliability of fixed assets, as well upstream projects.

As for environmental projects, a decision was made at government level to review some of these from the point of view of imports, Stepanov said.

Nornickel is at the advanced stage of the investment cycle for key projects to expand mining and modernize downstream capacity. Nornickel's capex this year, according to plans announced in early February, should rise 45% to $4 billion this year. The investment cycle is supposed to peak in 2023-2025, when annual capex will rise to $4 billion-$4.5 billion per year.