By Rhiannon Hoyle

 

The world is awash in nickel, one of the key ingredients in batteries for electric vehicles. That's roiling many miners that produce it.

BHP Group, the world's largest miner by market value, on Thursday joined several other producers in saying it will rethink plans for its nickel business to help it ride out the industry downturn. Prices of nickel have halved since the start of last year, as demand for the metal, including from EV makers, has failed to keep pace with new supply coming from countries including Indonesia.

BHP signaled it may write down the value of its nickel assets, which include open-cut and underground mines and a refinery in Western Australia. It is already paring some spending at the operations, known as Nickel West, while it considers further ways to mitigate the sharp fall in prices.

"The nickel industry is undergoing a number of structural changes and is at a cyclical low in realized pricing," the mining giant said in a quarterly report. "Nickel West is not immune to these challenges."

Nickel is primarily used in stainless steel, which accounts for more than 60% of global demand for the metal, although its use in electric vehicle batteries has been rising sharply.

It isn't the only commodity used in the global energy transition that is having a tough time. Prices of lithium and cobalt have slumped, partly because EV sales growth in the U.S. has plateaued. On Wednesday, Charlotte, N.C.-based lithium producer Albemarle said it will put off projects and cut jobs as it seeks to reduce costs amid the market slump.

BHP's view that the nickel market is experiencing structural changes suggests it sees little prospect in a recovery any time soon. Other companies have also been curbing production and writing down investments in response to the downturn in prices.

Earlier this week, Canada's First Quantum Minerals said it will suspend mining at its Ravensthorpe nickel mine in Australia, citing weak prices and high costs. A week earlier, the administrators of Panoramic Resources said its nickel operation, Savannah, would be suspended as hopes of a recovery in finances faded. Miner IGO last month braced investors for another write-down of its Cosmos nickel project, also in Australia.

Western miners of nickel face a challenge competing with output from Indonesia, which is typically produced at a lower cost. Indonesia produced around half of all nickel used in EV batteries made in 2022, up from somewhere between zero and 5% in 2017, according to CRU, a London-based firm specializing in commodities business intelligence. That's expected to exceed 80% by 2027, CRU says.

The supply glut is reverberating through markets. On the London Metal Exchange, the benchmark nickel contract has fallen to roughly $16,000 a metric ton, from more than $30,000 a ton at the start of last year.

BHP, which owns several undeveloped nickel deposits, including some acquired through its takeover of OZ Minerals, said it was paid 24% less for its nickel in the six months through December versus the year-prior period.

BHP's own production of the metal in the six months through December was 4% higher than the same period a year earlier. The miner stuck with an existing production forecast for the year through June, 2024, of between 77,000 and 87,000 tons.

 

Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com

 

(END) Dow Jones Newswires

January 17, 2024 23:04 ET (04:04 GMT)

Copyright (c) 2024 Dow Jones & Company, Inc.
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