MMC Norilsk Nickel PJSC, Russia’s largest mining company, is in advanced negotiations to establish a substantial copper smelting plant in Fangchenggang, a port city in China’s southern Guangxi region, according to individuals familiar with the discussions. The proposed smelter is expected to produce up to 500,000 tons of refined copper annually using concentrate sourced from Russia, marking a significant shift in Norilsk Nickel’s strategic approach to the Chinese metals market and responding to intensifying Western sanctions on Russian commodities.
The Fangchenggang smelter, if completed, would serve as a critical expansion point for Norilsk Nickel, commonly referred to as Nornickel, as the company moves to strengthen its presence in China. The facility would bring the final stages of copper processing closer to the Chinese market, the world’s largest for metals, enabling Nornickel to enhance its logistical efficiency and sidestep some challenges tied to the sanctions imposed by Western countries.
The decision to pursue a greenfield smelter — meaning the construction of a new facility from scratch rather than utilizing existing infrastructure — follows earlier attempts by Nornickel to partner with Chinese firms that already operate smelting facilities. Initially, the company explored options with at least two other Chinese companies to use their established smelters, but these plans were ultimately shelved in favor of a dedicated plant, according to sources who declined to be named due to the confidentiality of the ongoing negotiations.
The shift toward building a copper smelter in China aligns with the company’s broader strategy of securing access to international markets as economic and geopolitical tensions mount. Vladimir Potanin, Nornickel’s president, revealed in April that the company had been actively assessing options for cooperative ventures in China, motivated largely by intensifying Western restrictions.
Since Russia’s invasion of Ukraine in early 2022, Western countries have gradually intensified sanctions on Russian commodities, including key exports like aluminum, nickel, and copper, aiming to curtail Moscow’s revenue sources. Although Nornickel itself has not been directly sanctioned by Western nations, significant restrictions on trading Russian metals have impacted the company’s traditional trade flows, necessitating a more flexible and diversified approach to international sales.
While Nornickel’s planned smelter could provide the Russian mining giant with a more stable pathway to the Chinese market, the venture faces complex challenges, particularly due to China’s existing copper refining overcapacity. China’s copper industry has undergone rapid expansion in recent years, with substantial investments in smelting capacity that now exceed domestic demand for refined copper.
In Fangchenggang alone, China’s state-owned Jinchuan Group operates a 600,000-ton smelting facility, raising questions about the need for an additional large-scale plant. The new Nornickel facility, projected to add 500,000 tons of annual copper output, has sparked opposition from within China’s copper industry. Analysts argue that additional refining capacity would intensify competition for limited raw materials, potentially driving down margins across the industry. This internal pushback could complicate Nornickel’s progress, even as it addresses supply security in the face of geopolitical pressures.
China’s role as a buyer of Russian refined copper has been substantial, yet imports have seen a decline in recent months. According to official trade data, China imported approximately 165,000 tons of Russian refined copper during the first nine months of 2024, reflecting a drop of more than one-third compared to the same period in 2023. This downward trend underscores the uncertainty surrounding Russian resource exports, a situation exacerbated by an increasingly polarized global trade landscape.
For Nornickel, the construction of a Chinese-based smelter could provide a more reliable sales channel within China and reinforce the stability of its supply chain. The proposal to process raw concentrate in Fangchenggang could also help Nornickel bypass certain logistical bottlenecks and allow the company to integrate more seamlessly into the Chinese industrial ecosystem, ultimately reducing its exposure to the consequences of Western sanctions.
The planned Fangchenggang smelter represents an ambitious move for Nornickel, but it also underscores some of the complexities and risks inherent in China’s copper sector. Over the past decade, China has rapidly scaled up its domestic copper smelting capacity to meet robust industrial demand, driven by growth in construction, automotive production, and infrastructure projects. However, with recent economic slowdowns, the demand for refined copper has tempered, leaving the industry grappling with a surplus.
Experts note that China’s copper smelters now face heightened competition for raw materials, especially copper concentrate, the unrefined ore processed into finished copper. This scarcity has led to thinner profit margins across the industry. By adding a new source of supply from Russia, the Nornickel smelter could further disrupt the delicate balance of China’s copper sector, where many companies are already contending with profit pressures from overcapacity.
Industry analysts remain divided over the potential impact of Nornickel’s Fangchenggang project. Some view it as a shrewd response to shifting market dynamics and a way for Russia’s largest miner to secure its foothold in China amid increasing Western resistance. They argue that the smelter would benefit both China, which relies on imports for a significant portion of its copper concentrate, and Russia, which seeks stable markets for its metal products.
Others, however, caution that adding new capacity could further distort China’s copper market and intensify resource competition within the industry. As more domestic companies express concerns about the plan, Nornickel and its Chinese counterparts must navigate a complex web of economic, regulatory, and industry-driven factors to see the project through to completion.
For now, Nornickel remains tight-lipped on the specifics, with the company’s press service declining to comment. Observers suggest that the outcome of the Fangchenggang project may ultimately hinge on high-level negotiations between Chinese and Russian officials, underscoring the interplay of economics and diplomacy in this significant development for the global metals market.
