NICKEL is on track to end 2012 as the worst performing base metal and 2013 doesn't look much better. In fact, the only hope for existing nickel producers is that some of the emerging operations strike technical problems in their commissioning processes of which there is a reasonable prospect.
As of the London Metal Exchange close overnight, nickel at USD 17,275 a tonne is down 7.37% since January 1 and stocks in LME warehouses are at their highest since May.
It had been hoped low prices would force the closure of many Chinese nickel pig iron producers and so leave a clearer field for conventional nickel miners, but Chinese imports of nickel ore and concentrates hit a record in November, so it looks as if production of NPI, this cheaper alternative to nickel for stainless steel manufacture, is booming. And so the conventional nickel producers continue to do it tough.
Just before Christmas, Russian miner Mechel OAO said it would shutter its South Urals nickel plant owing to the slowdown in demand for the metal and what the company regarded as a bleak outlook for price recovery in the near future. It is looking for a buyer for the operation.
Much of the additional nickel threatening to flood the world market is due to come from laterite ore, the type that has caused so many technical headaches to miners over the years. It’s a TINA (there is no alternative) situation: there is simply not enough sulphide ore to guarantee future supply.
Brazilian mining giant Vale is the latest to feel the effects of the laterite drama. In June it had to close its Onca Puma mine in the Amazonian state of Para because of smelting problems. Rebuilding the smelters will cost USD 188 million. Now it has taken a USD 2.85 billion impairment charge on the mine.
But new production keeps coming. Last week, the USD 1.5 billion Ramu laterite nickel and cobalt mine in Papua New Guinea announced its maiden shipment.
And this week comes news another huge laterite mine, Xstrata Nickel’s Koniambo project in New Caledonia, is well into its commissioning process and about to produce its first ore, with a second production line due for completion before June. By the end of 2014 the project is expected to produce at the rate of 60,000 tonnes a year of ferronickel.
