Norilsk Nickel turns down Glencore offer By Catherine Belton in...

Norilsk Nickel turns down Glencore offer
By Catherine Belton in Moscow

Published: August 12 2010 19:02 | Last updated: August 12 2010 22:42

Glencore, the worlds largest commodities trader, offered to buy the entire nickel production of Norilsk Nickel, the worlds biggest nickel producer said, in a deal that would have given the trading house control of nearly 50 per cent of the global trade of the metal.

Norilsk said it had turned down the offer because it believed it would have resulted in negative economic and non-economic effects for the company.

EDITORS CHOICE
Drought to hit next Russian grain crop - Aug-12.Ukraine considers cap on wheat exports - Aug-11.Short View: A handy predictor of inflation - Aug-10.Opinion: Regulate volatile food markets - Aug-09.Video: No food crisis, for now - Aug-09.Drought doubles price of barley in six weeks - Aug-08..Glencore, according to a prospectus for bondholders, is already one of the largest globally active physical suppliers of nickel, ferronickel and nickel products.

Traders said that the offer was not surprising as Glencore buys large amounts of metal for big miners.

Glencore declined to comment on Thursday.

On the London Metal Exchange, nickel for delivery in three months fell 0.5 per cent to $21,495 a tonne. The price of the metal has risen 13 per cent this year, but remains well below the all-time high of more than $50,000 a tonne set in 2007.

The discussions between Norilsk and Glencore ended several months ago, the Russian company said, adding it could not disclose further details due to confidentiality agreements.

But one person familiar with the matter said Norilsk had been concerned about the potential conflict of interest such a deal could pose for Glencore as the owner of several nickel assets in Australia and the controlling shareholder of Xstrata, one of Norilsks chief competitors. Glencore ended the discussions after Norilsk raised these concerns, the person said.

The person familiar with the situation said Norilsk and Glencore pursued different strategic goals, with the latter interested in earning the bulk of its profits on price volatility, while Norilsk was interested in price stability. From this point of view it is difficult to speak of any strategic partnership between the two, the person said.

The disclosure of the proposed deal appears to be part of a growing propaganda fight around Norilsk. Its two main shareholders, Oleg Deripaska and Vladimir Potanin, rival metals tycoons, are battling for the control of the nickel producer.

Mr Deripaska controls 25 per cent of Norilsk and has in the past sought to lead a merger of his UC Rusal aluminium group with Norilsk, a move that was opposed by Mr Potanin, who also owns 25 per cent in Norilsk