The nickel industry faces an era of relatively low prices with a looming nickel oversupply, reports Perth-based Intierra Resource Intelligence, a supplier of business intelligence to the global resources sector.
Nickel supply is starting to grow quickly, partly as a result of the start up of new mines and ramp-up of existing mine supply.
Since mid-2011, the market has been in surplus, and Intierra forecasts yearly surpluses of between 40 000 t and 50 000 t over the next few years.
New nickel supply is difficult to absorb, regardless of nickel pig iron (NPI), a low-grade ferro- nickel used as a cheaper alternative to pure nickel in stainless steel production, which has negatively affected the nickel price, Intierra base metals director Paul Dewison tells Mining Weekly.
He, however, points out that the upside of low prices is that it should discourage new mine development beyond the near-term project list. After 2016, this should create a nickel deficit and relieve fears of oversupply.
The main challenge faced by the nickel market in recent years has been NPI production, which was responsible for nearly all the growth in nickel output, notes Dewison.
NPI, first used in Japan, but now used almost exclusively in China, employs low-grade nickel laterite ores fed directly into either blast or electric furnaces to make stainless steel.
He says the proposed export ban on nickel ore from large nickel producer Indonesia will have a major effect on the pro- gression of NPI as it would reduce the availability of nickel ore grades that are high enough in the global market.
However, he notes that a rise in the cost of NPI, owing to higher Indonesian export taxes coupled with rising energy prices in China, is more likely and would affect China’s consumption.
“This rise in the NPI price is likely to occur despite the growth ofmore efficient rotary kiln electric furnace production of NPI and will, as a result, lead to a rise in nickel prices,” Dewison says.
Nickel is mined from sulphide and laterite ores.
Sulphides, the main source of nickel ore, are mined through underground operations and generally contain a significant number of by-products, such as gold, silver, copper and platinum-group metals.
Laterites can be mined through openpit methods and are becoming the most important source of nickel ore, as sulphide miners are experiencing declining ore grades and supply side concerns relating to limited discoveries of new sulphide ore deposits.
Dewison notes, however, that the nickel industry still lacks appropriate technology to achieve cheaper and more reliable high-pressure acid leaching for nickel laterite processing.
Another challenge is the economic development of low-grade sulphides such as NPI and the economic limitations of processing complex concentrates, he adds.
The value of nickel sold yearly amounts to about $31-billion, says Dewison.
This might decline slightly as the rate at which the prices fall exceeds that of the increase in demand.
The market value of nickel might, however, start to increase quite rapidly in the latter half of this decade, says Dewison.
“As we see a rise in nickel prices and volumes, the market value will also rise quickly,” he adds.
The best opportunities for growth in the nickel industry are in the stainless steel market, notes Dewison.
“Stainless steel, although a volatile market, owing to the knock it experienced during the global economic downturn and its poor performance in China, still has a higher underlying growth rate than other end-uses of nickel.”
Further, China will add growth to the market as a large nickel consumer, although its current demand growth has diminished compared with its past consumption, highlights Dewison, who believes that China will continue to outperform the rest of the world in economic growth and commodities use.
Meanwhile, the nickel landscape could change with merger and acquisition activity; the most obvious being the proposed $30-billion takeover of diversified miner Xstrata by commodities trader Glencore.
Mining Weekly reported that Glencore already owned almost 34% of Xstrata and was offering 2.8 new shares for every Xstrata share held. Success would conclude its long-standing plan to create an integrated mining and trading powerhouse.
The ramp-up and new supply of nickel mines will mean that owners of new mines, such as Brazilian miner Vale, should become more important and new entrants, such as base- metals miner First Quantum, will become a major part of the industry.
Dewison points out that there have been different reactions from mining companies on the changing nickel landscape, especially from steel-making raw materials companies.
“Vale wishes to diversify from its iron-ore base, as a related product expansion in nickel is an important strategic goal for them. “In contrast, iron-ore major BHP Billiton divested some of its nickel assets in 2009 and it has since invested relatively little, while Rio Tinto, not currently a nickel producer, has sold its only large nickel asset,” concludes Dewison.