Interface News Reporter | Hou Ruining
BHP Billiton, the world's largest mining company, has decided to suspend production and operation of its nickel project in Australia.
On July 11th local time, BHP announced that it will suspend the operation of its Western Australian Nickel related projects from October this year until February 2027 when the decision will be reviewed again. This is mainly due to the oversupply in the global nickel market, which has led to a decline in prices, and a significant drop in nickel prices over the next five years has become a consensus.
BHP Billiton stated that after the transition period ends in October, it will invest approximately $300 million annually to support the potential restart of the Western Australian nickel industry. The transition period will begin in July this year, with operations suspended in October and the handover work for the temporary shutdown completed in December.
During the suspension of operations, BHP will suspend the mining and processing operations of Kwinana Nickel Refinery, Kalgoorlie Nickel Smelter, Mt Keith and Leinster, as well as the development of the Simos Graves project; Implement work maintenance and upkeep plans to ensure the continued safety and integrity of its mines and related infrastructure; Continue investing in exploration to extend the resource life of nickel mines in Western Australia and retain options, etc.
Nickel is an important industrial metal, with end products including refined nickel, nickel iron, and nickel sulfate, widely used in industries such as steel, machinery, and construction. With the development of the new energy industry chain, nickel has been applied as a material for ternary batteries and has become an important energy metal.
From the perspective of demand structure, stainless steel remains the largest consumer area for nickel in the current downstream demand; The battery sector contributes the main increment to the nickel market. Previously, the growth rate of nickel used in batteries was much higher than the overall demand growth rate.
In 2022, due to the continuous decline of London Metal Exchange inventory and the outbreak of Russia-Ukraine conflict, the nickel price once exceeded 310000 yuan/ton, and then gradually returned to rationality.
Currently, major leading enterprises are turning to layout lithium iron phosphate batteries, with their market share continuously surpassing ternary lithium batteries, which also affects the demand for nickel as a ternary battery material.
Lithium iron phosphate and ternary batteries are the two mainstream routes for power batteries. The former has increasingly prominent advantages in terms of safety and cost, while the latter has advantages such as high energy density, small size, and large capacity. In the current electric vehicle market that emphasizes cost-effectiveness, power batteries are gradually shifting towards more competitively priced lithium iron phosphate batteries.
Bloomberg New Energy Finance stated in a report released in June that the market share of lithium iron phosphate batteries in the global new energy passenger vehicle market will exceed 50% in the next two years. In China, since July 2021, the market share of lithium iron phosphate batteries has surpassed that of ternary batteries.
Last year, the growth rate of demand for nickel in the field of new energy power batteries slowed down, and nickel shifted from structural surplus to comprehensive surplus. Global explicit nickel inventories began to accumulate after falling to a low point in mid-2023. After October 2023, the accumulation rate of nickel inventories has accelerated, becoming the main driving factor for the decline in nickel prices. Last year, nickel prices fell from around 240000 yuan/ton at the beginning of the year to a price range of 130000 yuan/ton at the end of the year, with a decline of over 45%.
Since the beginning of this year, nickel prices have continued to decline. On July 10th, the main contract for Shanghai nickel, NI2409, closed down 2.91% to approximately 133700 yuan/ton. On July 11th, the main contract for Shanghai nickel, NI2409, hit a intraday low of 133300 yuan/ton, setting a half month low.
The oversupply of nickel this year will continue. According to predictions from the International Nickel Research Group (INSG). After experiencing surpluses of 98000 tons and 163000 tons in 2022 and 2023 respectively, global nickel supply is expected to exceed demand by 109000 tons in 2024.
Public information shows that BHP Billiton's nickel mines are concentrated under the Western Australian Nickel Company, and X's main eight mines are all sulfide nickel mines.
As of June 2021, BHP Billiton's total nickel resources were 7.372 million tons, and its nickel production for the fiscal year 2021 (July 1, 2020-30, 2021) was approximately 89000 tons.
BHP Billiton stated that since the 2020 fiscal year, the company has invested approximately $3 billion (approximately RMB 21.793 billion) to maintain the ongoing operations of Western Australian Nickel and reposition its production in the battery and electric vehicle markets.
However, the global decline in nickel prices has led Western Australian Nickel to expect a potential pre tax, interest, depreciation, and amortization profit of approximately negative $300 million (approximately RMB 2.179 billion) for the fiscal year ending June 30, 2024.
In February of this year, BHP announced plans to evaluate Western Australian Nickel and make a pre tax non cash impairment charge of approximately $3.5 billion on its book value. Due to the decision to suspend operations, BHP expects to recognize a pre tax non cash impairment charge of $300 million as an exception in the group's financial statements for the 2024 fiscal year.
Despite suspending nickel projects in Western Australia, BHP has stated that the state remains an important investment destination for BHP globally, with investments expected to exceed AUD 12 billion (approximately RMB 59 billion) over the next five years.
In addition to BHP Billiton, chemical giant BASF also abandoned its more than three-year investment project in nickel and cobalt in Indonesia at the end of June, which was originally planned to reach billions of yuan.
In February of this year, Glencore announced that it would sell its stake in Koniambo Nickel SAS (KNS) in New Caledonia, while the KNS nickel processing plant would suspend production for six months.