BHP is considering options for its nickel operation amid a sharp price correction for the metal last year and warned it could write down the assets.
Citing BHP’s production update on Thursday, Bloomberg News said the miner would update the market at its half year results announcement next month. “The nickel industry is undergoing a number of structural changes and is at a cyclical low in realized pricing,” BHP said. “Nickel West is not immune to these challenges.”
Nickel prices dropped 45% last year, weighed down by a flood of cheap supply from Indonesia, where new techniques to produce battery-grade material are threatening to disrupt the industry, said Bloomberg News.
BHP’s warning adds to a string of similar announcements from other companies, as smaller miners struggle to raise money from more traditional sources and grapple with rising costs, the newswire said..
Earlier this week, First Quantum Minerals said it would halt mining at its nickel and cobalt operation in Western Australia and cut a third of the workforce in response to weaker metal prices and higher costs. The metal is used to make stainless steel and EV batteries.
Sibanye-Stillwater, the Johannesburg listed miner, said it would not hesitate to cut production from underperforming assets. These include a nickel refinery it operates in northern France which made a loss in the six months ended August.
It said in a third quarter update in November that the Sandouville nickel refinery was “unsustainable”, but added that alternative plans were being tested to keep the asset alive. “Further repositioning is being considered,” said CEO Neal Froneman.
Glyn Lawcock, a resources analyst at Australia’s Barrenjoey, told Bloomberg News that the massive surplus of Indonesian nickel supply had caught the market by surprise. “By nature we’re in a cyclical industry — today, it feels like nickel’s not the place I want to have money tied up and invested in,” Lawcock told the newswire.