Global nickel miners are coming under renewed pressure to cut costs or close capacity as a flood of cheap ore pushes prices to one-year lows, with analysts seeing little prospect of recovery, Reuters reported
Indonesia and the Philippines are ramping up shipments of nickel ore after Indonesia relaxed an ore export ban earlier this year and a hardline Filipino environmentalist was ousted from the country's mining ministry.
Nickel ore is popular as a cheaper alternative to refined metal for China's vast steel mills, which use the metal to add strength to stainless steel.
The renewed supply comes as the market is already struggling with softening demand and high stocks, leading a slew of banks to slash their forecasts despite prices having already fallen 60 percent since mid-2014 80 percent from their 2007 peak.
Citi recently told clients that for the first time in 10 years it saw little chance of a rally in the short, medium or long term.
"Miners have been holding on as long as they can. They will be close to running out of wiggle room in terms of cutting costs," said Mark Pervan at consultancy AME Group in Sydney.
"We need to see some reasonably sized refined capacity cutbacks to restore prices and confidence back to the market."
Consultant Wood Mackenzie estimates that more than half of the world's nickel industry is running at a loss. High cost mines include those in the Dominican Republic, Greece, Cuba, Western Australia and New Caledonia, analysts said.
Brazil's Vale has already said that it plans to suspend two of its older high-cost Canadian mines this year.
"Prices have persisted for some time now and our focus throughout this period has been on reducing costs and improving performance throughout our operations globally," Vale spokesman Cory McPhee said.
New Caledonia, home to three of the world's top-10 projects, is one of the highest cost producers.
Christel Bories, CEO of France's Eramet said recently that losses at its Societe Le Nickel (SLN) operations were "not sustainable", while Vale NC, a branch of Brazil's Vale, said its Q1 cost of production stood at $11,232, well above the LME nickel price around $8,890.
The French government, however, has supported both mines with state loans, aimed at protecting jobs.
Some mines, such as the Falcondo ferronickel plant in the Dominican Republic, exited the market when prices last dipped. That mine since returned under new ownership.
Mines built during periods of high prices could be the first on the chopping block, while some operations could be wound down ahead of their expected closure dates, said analysts.
