"The nickel market is balanced now. Average prices for 2012 are close to average prices for 2010. We do not expect any meaningful deficit or surplus on the market," he said.  

The Arctic miner, the world's largest producer of nickel and palladium, believes that the level of current nickel premiums is higher than in the fourth quarter of 2011 but it is not expected to rise in 2012 from the 2011 level. 

Benchmark nickel futures on the London Metal Exchange (LME) have risen 9 percent since the beginning of the year, partly due to strong buying from China at the end of 2011 and short covering by funds, some analysts believe.

Sprogis rejected this view and said the main reason for the gains was the partial return of investors to the market, while China's impact was indirect and not as significant. 

"China's consumption of physical metal will increase in 2012, and possibly there could be an additional demand to replenish the government and commercial stocks," he said. 

The global nickel market was in a supply surplus of 17,000 tons last year, the latest monthly bulletin from the Lisbon-based International Nickel Study Group (INSG) showed on Thursday.

Norilsk, controlled by mining tycoon Vladimir Potanin's Interros consortium, is responsible for about 20 percent of world nickel output and about 2 percent of copper, but is hoping to increase its share of the copper market. 

UC RUSAL, the world's largest aluminum producer is also a major shareholder and has clashed with Potanin and Norilsk's chief executive over strategy and management.  

Three-month nickel on the London Metals Exchange was trading at $20,000 per ton on Thursday. 

"The level of about $20,000 per ton is loss-making for up to 5 percent of global nickel production. So about 80,000-100,000 tons of nickel are in the risk zone now," Sprogis said, adding that these loss-making assets are located mainly in Africa, Australia and in China. 

Sprogis said current copper demand was stable and spot premiums were higher than in the fourth quarter of 2011, while outright prices were above the level of fundamental support. Three-month copper on the London Metals Exchange was trading at $8,270 per ton on Thursday. 

"The current price of about $8,700 per ton leaves room for volatility. But we do not expect new volumes from stocks or mine launches to appear on the market," he said. 

He also saw demand and consumption of palladium rising in a sustainable fashion. 

The difference between palladium consumption and production is likely to be covered by metal of Russian origin accumulated in Western stocks after export by the state precious metals and gems repository Gokhran in the previous years.

"This market will be balanced for many years. Additional consumption will be covered by supply from these stocks," he said. 

Sprogis said he believed the price difference between precious metals - gold, platinum and palladium - would contract in future due to the appeal of PGMs: "Platinum and palladium are more precious than gold and more industrial than copper." 

Commodities trading giant Glencore, which owns 8.75 percent of RUSAL, this month planned to merge with Xstrata through a $90 billion all-share deal, the mining sector's biggest to date.

The combined company would remain the fifth largest nickel miner in the world and would control 6 percent of the global output.

In 2010 Glencore offered a marketing deal to Norilsk, which was rejected because Norilsk saw a conflict of interests.

"Market stability is our major interest and Glencore in its IPO prospectus specified directly that market volatility is one of the main sources of its profit," Sprogis said. 

He reiterated Norilsk's view that high volatility in the long run is damaging both to producers and to consumers of the metal and said he hoped Glencore and Xstrata would not embrace market volatility were the merger to be finalized. 

"We would welcome this merger if the result of it would be the appearance of a company which shares a negative opinion of volatility," he said.

"If the head of Xstrata, as planned now, will become the head of the new company, the producer mentality might dominate in the new company," he added. "I would like to believe that the core business of this company will be production, and the side business will be playing market volatility."