Nickel: Once again, operations under threat

Roskill view: Roskill view: Prices of nickel once again dropped below US$9,000/t, as forecasts of supply from Indonesia and the Philippines have seen further upward revision. In Indonesia, where the government previously banned the export of unprocessed mineral ores in order to stimulate the country’s domestic processing industry, PT Antam had previously received an export licence to export up to 2.7Mt of ore (containing less than 1.7% Ni). Last week, another mining company – PT Ceria Nugraha Indotama – received a similar licence for 2.3Mt, to be exported over the coming year, while it continues development of a ferronickel smelter in East Halmahera. These export licences will add several dozen kilotonnes to the supply of nickel in 2017 and 2018. This, combined with abating fears on supply restrictions in the Philippines, will likely ensure a surplus in the market in both years. Consequently, a number of higher-cost operations may face tough conditions in coming years. Last week, the CEO of Vale, which rivals Norilsk Nickel for the position of the largest producer of nickel in the world, announced it would review a number of its nickel assets, as it saw “no indication of recovery in the near term”. Top on the list of operations that may face further scrutiny is the Goro operation (now known as Vale New Caledonia), which has faced financial and operational difficulties. As prices of nickel remain low, it is likely that other miners will follow suit. For this reason, Roskill expects that although supplies from Indonesia and the Philippines may increase, these will be partially offset by cutbacks in the rest of the world.

To discuss the nickel market with Roskill, contact Thomas Höhne-Sparborth: ths@roskill.com