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Lower production among the world's largest nickel miners in response to a price slump for the metal end up supporting the market.
That’s according to Russian metals giant Nornickel. London Metal Exchange nickel prices are down around 30% in the year through Friday, primarily driven by burgeoning supply from Indonesia — the world's largest producer of the metal.
Nickel — used in steel making and electric vehicle (EV) batteries — is in oversupply. That coincides with weak demand from the European, Chinese and U.S. stainless steel industries plus a tempered outlook for EV sales growth.
Inflationary pressures also raised miners' cost of extracting nickel, helping to prompt a production cutback to save money.
"The price has not yet reacted to the potential supply risks, but any further supply curtailments could impact the primary nickel supply materially, which would likely support the LME (London Metal Exchange) quotes in the near term," Nornickel said in an outlook this month. The company, which is the world's biggest producer of refined nickel, seemed slightly more positive than other major nickel producers.
Nickel producer BHP Group Ltd. (NYSE:BHP) expects supply and demand in the nickel industry not to rebalance until the late 2020s.
The company recorded a $2.5 billion impairment charge at nickel operations in Western Australia and said it is considering putting one of the assets on care and maintenance and is assessing spending on development of another asset there.
"We expect this oversupply is going to persist for some time, which we've called end of this decade, whereas the 2030s are likely to be more attractive," BHP CEO Mike Henry said in a conference call Tuesday.
Another major nickel producer, Glencore (OTC:GLNCY), doesn't expect the market rebalancing "for quite some time," the company said Wednesday.
The Swiss miner and commodities trading giant is looking to sell its stake in a joint nickel venture in the South Pacific and will put the unprofitable mine on care and maintenance in the meantime. It cited high operating costs and a very weak nickel market.
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"Battery demand, which has been growing exponentially in recent years, is expected to grow at a slower rate in the short term, as some EV manufacturers scale back sales forecasts," Glencore said. "Demand from the stainless steel and alloy sectors has continued to increase, but total demand is unable to absorb the large supply additions to the market."
Mining giant Vale (NYSE:VALE) is assessing how to lower costs at its Thompson operations in Manitoba, Canada, and its Onça Puma operations in Brazil, Mark Cutifani, chair of the company's base metals business, said in a conference call Friday.
Productivity improvements over the next two to three years could translate into 15% operating cost reductions, he said. Separately, the company is prioritizing a decision about merging its nickel operations in Ontario, Canada, with those of Glencore to save on costs, Reuters reported.
"The asset review is taking us in the right direction," Cutifani said. "We've just got to get there as quick as we can."
Other recent nickel mining developments related to the falling price include:
Image: Pixabay