① By the close of last week, LME's nickel futures were reported at $16,243 per ton, down more than 40% from the same period last year; ② Industry insiders began questioning the prospects of most nickel mines, and BHP Billiton also began considering whether to advance its next plans for Western Australia mines.
Financial Services, Feb. 5 (Editor Zhao Hao) A year and a half ago, BHP Group (BHP Group), the world's largest mining company, announced that it had signed a nickel supply agreement with Tesla and Toyota. At the time, executives also revealed that the company would increase spending on nickel ore exploration in the next two years to meet the growing market demand for nickel ore.
At that time, BHP Billiton's management had identified nickel as a key pillar of the company's business growth. The Financial Services Association reports mentioned that the company holds 120,000 hectares of land in Western Australia. Exploration results show that the region has nickel reserves of more than 7.4 million tons, making it the second largest nickel sulfide resource base in the world.
However, the good times did not last long. The situation in the nickel market deteriorated rapidly within 18 months. In particular, under the impact of Indonesia's massive new supply, the market experienced an oversupply crisis. According to a media survey last week, the nickel market is expected to have an oversupply of 245,500 tons in 2024 and an oversupply of 204,000 tons in 2025.
At the same time, prices also showed trends in line with fundamentals. As of the close of last week, nickel futures on the London Metal Exchange (LME) reported $16,243 per ton, down more than 40% from the same period last year.
Analysts at Australia's Macquarie Group estimate that based on current nickel prices, more than 60% of companies in the global industry will lose money. Industry insiders are beginning to question the future of most nickel mines. Mines around the world are at risk of closure, and BHP Billiton is also considering whether to advance its next plan for its Western Australian mine.
Tom Price, head of commodity strategy at Liberum Capital Ltd., said that after the tide in the nickel world has subsided, some high-cost assets have now been revealed. He added that the mines in Western Australia and New Caledonia are probably the most vulnerable.
In September of last year, Glencore announced that it would stop investing in the Koniambo nickel mine, which continues to lose money after February 29, 2024. The company explained at the time that due to uncontrollable factors such as cost structure and market conditions, the operation of the mine faced financial difficulties and suffered significant losses.
At the end of last year, Panoramic Resources Ltd.'s Western Australian mine entered a “voluntary management” process. The company planned to suspend operations at this nickel mine at the beginning of the year due to failure to find buyers and partners.
According to some sources, during a crisis meeting last month, Australia-based miners asked the federal government to provide tax credits for the downstream processing industry.
Although low nickel prices are expected to weigh on production, analyst Allan Ray Restauro said that a pullback in production is unlikely to immediately support nickel prices. He expects Indonesia's massive supply to continue to put downward pressure on prices in 2024, as the region already accounts for nearly half of the world's production.
Liberum's Price said, “Obviously, only rising nickel prices can prevent the closure of projects such as mines. Normally, only a recovery in nickel demand can achieve this goal.”
Nickel is mainly used to produce stainless steel and electric vehicle batteries. Recently, many companies related to electric vehicles have indicated a downward trend in demand for this consumer product.