During January, Andrew Forrest announced that Wyloo Metals would place its nickel mines in Western Australia on care and maintenance at the end of May. This news followed a series of announcements from nickel operations in Western Australia, including BHP reporting a $2.5 billion impairment related to its Nickel West operations, which operates a major nickel concentrator in Kambalda; First Quantum Minerals’ decision to cease mining at its Ravensthorpe nickel-laterite mine; Panoramic Resources closing its Savannah nickel mine; and IGO placing its Cosmos project on care and maintenance.
The decision must have been particularly difficult for Forrest after subsidiary Wyloo Metals bought the Mincor nickel assets last year for A$750 million. Those mines in the Kambalda region supply concentrate to BHP. BHP, Wyloo and IGO mine sulphide ore, which is less energy intensive to process than laterite ore, but still more expensive than competitive nickel producers in Indonesia, who rely on inexpensive coal-fired power.
To the north in New Caledonia, Glencore decided to place Koniambo Nickel SAS (KNS) on care and maintenance. The company said it will fund the operation according to an agreed budget as it begins an orderly transition. The furnaces will remain hot for six months, and the KNS team will support the critical activities required to maintain the integrity of the asset and keep the site secure. Glencore said it has funded KNS for more than 10 years without ever realizing a profit.
The nickel industry moved into significant surplus during 2023 as Indonesian supply continued to outpace demand. BHP said Indonesian production of Class-II nickel products is up around 3.6 times since 2019, and its production of intermediates has increased dramatically in the last two years.
The glut of Indonesian nickel is obviously impacting these operations and also creating tension between the miners and the London Metal Exchange (LME). BHP said the conversion of Indonesian-origin nickel products into cathode, which the London LME chose to allow onto its platforms, saw the significant non-Class-I surplus spill over into visible Class-I inventory, and then LME pricing. LME prices for nickel fell dramatically in 2023.
Despite the curtailments that have already been announced, BHP estimates that the nickel business is in a “multi–year run of surpluses that are likely to average out well over 5% of annual demand.” Last year BHP integrated the West Musgrave project with the Nickel West operations to create the Western Australia Nickel business unit. While the West Musgrave project is not yet operational, the Western Australian Nickel business unit produces more than 77,000 metric tons per year (mt/y) of nickel.
BHP recently said it is assessing its plans for Western Australia Nickel. These include optimizing operations, reducing discretionary expenditure and reviewing capital plans. The company is also looking at the longer-term future of Western Australia Nickel, including potentially entering a period of care and maintenance at Nickel West, and assessing phasing and capital spend for the development of the West Musgrave project.
When it comes to Indonesian nickel, Nickel Industries is a case in point. It acquired the Hengjaya mine prior to the Indonesia export ban on nickel ore 10 years ago. What looked like bad timing turned out to be an opportunity. The company built a relationship with Tsingshan Industries, the world’s largest stainless steel producer, which decided to build a nickel pig iron (NPI) smelter and stainless steel mill at the Indonesia Morowali Industrial Park (IMIP). With Tsingshan’s help, Nickel Industries restarted Hengjaya and it purchased the Ranger nickel mine, both of which supply IMIP. Nickel Industries then acquired the Angel and Oracle mines and smelters, which are vertically integrated operations with coal-fired power plants. Today, Nickel Industries supplies 136,000 mt/y of nickel matte.
