UPDATE 2-Norilsk suspends Australian nickel production

Mon Feb 16, 2009 12:19pm GMT

* Suspends Black Swan, Lake Johnston mines

* About 330 job losses expected by March

* All nickel operations in Australia now suspended

* Total Australia cuts equal 13 pct of total '08 output

(Adds details, analyst comment, share price)

By Robin Paxton

MOSCOW, Feb 16 (Reuters) - Norilsk Nickel (GMKN.MM: Quote, Profile,Research) is suspending production at its last two active mines in Australia, the final victims of an economic crisis that has brought the Russian miner's entire Australian network to a halt.

Norilsk, the world's largest nickel miner, will suspend the Black Swan and Lake Johnston nickel operations with immediate effect in a move that will result in 330 job losses by March, the company said on Monday in a statement.

"Market and other conditions have left the Australian business unsustainable given current metal prices," Norilsk said. It did not say when the mines might be reopened.

Nickel MNI3 has lost more than 60 percent of its value in the last 12 months. The metal, which gives stainless steel its strength and sheen, is worth only a fifth of its record price of $51,800 a tonne reached in May 2007.

Black Swan and Lake Johnston together produced about 25,000 tonnes of nickel in concentrate last year. Alfa Bank said the latest cuts, combined with earlier mine closures in Australia, were equivalent to 13 percent of Norilsk's 2008 nickel output.

"By the nature of the fact you are the biggest player, you have to absorb most of the cutbacks in supply if you want to get the market back to equilibrium," Barry Ehrlich, senior analyst at Alfa Bank, said.

Norilsk produced 299,721 tonnes of saleable nickel last year, up from 276,000 tonnes in 2007, and has forecast output of between 290,000 and 305,000 tonnes of the metal this year.

Nomura Research revised down its nickel production forecast for Norilsk to 285,000 tonnes, but revised its 2009 net profit forecast up to $228 million, from $186 million previously, due to the closure of the high-cost Australian operations.

Nomura also raised its 2009 EBITDA (earnings before interest, taxation, depreciation and amortisation) for Norilsk by 3 percent to $1.6 billion.

REDUCED WORKFORCE

Norilsk would retain an Australian workforce of around 20, reduced from about 500 before it started to cut production, a company spokeswoman said.

The company said the last Western Australian assets to close had "potential for further exploration" but would be placed on care and maintenance.

"Care and maintenance, while not permanent, is not just shutting down for a month. It looks like, minimum, a mid-term shutdown," Alfa Bank's Ehrlich said.

Norilsk, which supplies about a fifth of the world's nickel, said on Oct. 17 it would halt production at the Cawse laterite operation, which it acquired through its purchase of OM Group's (OMG.N: Quote, Profile, Research) nickel business in 2007. [ID:nLH324050]

In November, the company suspended production at its Waterloo and Silver Swan underground mines, which had produced about 10,000 tonnes of contained nickel over the preceding 12 months. [ID:nLP523489]

Silver Swan is the underground operation at Black Swan, which is an open-pit operation. The projects are 53 km (33 miles) east of Kalgoorlie.

Norilsk acquired these projects, excluding Cawse, when it bought control of LionOre Mining International in 2007.

Norilsk's Moscow-traded stock fell 4.8 percent to 2,045 roubles by 1135 GMT, falling further than the MICEX exchange's metals and mining index , which dropped 2.4 percent

NICKEL-Major market developments in January

Wed Feb 11, 2009 1:07pm GMT

LONDON, Feb 11 (Reuters) - Global nickel prices will weaken further unless more output cuts are made to offset falling demand and prevent the market from recording a supply surplus for the third consecutive year, analysts say.

"Prices will remain under pressure. Stocks are still rising, and it's obvious demand, especially from the stainless industry, is dropping sharply," independent consultant Angus MacMillan said.

More production cutbacks and closures are expected.

"I see more closures coming. The price has got to go lower still. There's so much nickel in the system even with the cuts, there's so little demand right now," an analyst said.

He said the October low of $8,850 was probably a good downside target.

At 1238 GMT the London Metal Exchange (LME) three-months nickel price MNI3 was indicated at $10,360/560 a tonne.

In early January it reached a two-month high of $13,550 ahead of the annual re-jigging of major commodity indices. But the market failed to consolidate these gains once attention returned to the ailing world economy and poor demand prospects.

Inventories of nickel in LME warehouses are at their highest in almost 14 years.

Vanessa Davidson of industry consultants CRU Group made the point that stocks were rising from already high levels, after the market recorded substantial surpluses in the past two years.

"Chances are that the market will move into deficit as the year wears on with the supply cuts, but that won't be enough to give a deficit for the year as a whole," she said.

Below are some of the more significant recent developments in production, stocks and prices that may influence the direction of the market in 2009.

PRODUCTION:

Jan 29 - Vale Inco (VALE5.SA: Quote, Profile, Research) will restart concentrate shipments from its Voisey's Bay nickel mine in eastern Canada after reaching an agreement with the province of Newfoundland and Labrador over a proposed nickel processing plant. Vale had agreed to start holding back shipments of concentrate to smelters in central Canada after the two sides missed a deadline to come up with a construction schedule for a low-cost hydro-metallic processing plant in the province.

Jan 29 - Indonesia's PT Aneka Tambang (ANTM.JK: Quote, Profile,Research) said it plans $265.4 million in capital expenditures, up three-fold on 2008, to position itself for an eventual recovery in commodity prices. The company also said it expected ferro-nickel output, its biggest contributor to revenue, to fall 30 percent to 12,000 tonnes this year.

Jan 22 - China produced 132,641 tonnes of refined nickel in 2008, up 11.4 percent in 2008 from a year earlier, according to figures released by the National Bureau of Statistics.

Jan 22 - BHP Billiton (BLT.L: Quote, Profile, Research) (BHP.AX: Quote,Profile, Research) may suspend operations at its Yabulu nickel refinery indefinitely after completing a study on its future in the first half of 2009, analysts said. The plant's output is already being cut by about 50,000 tonnes a year following the company's announcement of the closure of its Ravensthorpe laterite nickel mine in Western Australia, which supplies Yabulu with nickel-cobalt hydroxide for processing into nickel and cobalt.

Jan 21 - BHP Billiton said it will suspend its Ravensthorpe nickel mine in Australia due to poor prospects for profitability. It also said it would reduce mining activity at its Mount Keith project in Australia but would maintain nickel concentrate output.

Jan 20 - Anglo American Plc (AAL.L: Quote, Profile, Research) (AGLJ.J:Quote, Profile, Research) has temporarily halted production at its biggest nickel mine in Venezuela. Output at the operation has been stopped partly due to high transport costs at the mine.

Jan 20 - Eramet (ERMT.PA: Quote, Profile, Research) said it has won an exploration licence for two nickel deposits in New Caledonia that could potentially double its output of the metal. The exploration phase will take up to nine years, followed by a three-year feasibility study for local processing of the ore.

Jan 5 - Jinchuan Group Ltd, China's top nickel producer, said it plans to increase nickel output this year to 125,000 tonnes from 104,600 tonnes in 2008.

PRICES

Nickel prices ended January at $11,300 a tonne, down from $11,700 a month earlier. But early last month they shot up to a two-month high of $13,550 ahead of the annual re-jigging of major commodity indices.

Nickel failed to hold onto its early gains once the re-balancing started though and market focus returned to the weak global economy.

Prices appear to be stuck in a $10,000-$12,000 trading range for now, but if anything a break on the downside looks the more likely as stocks build and demand worries persist.

In January, the twice-yearly Reuters base metals price poll [MET/POLL] put the median average for the LME cash nickel price MNI0 at $11,023 a tonne.

STOCKS

LME nickel stocks continued to climb in January, ending the month at 84,084 tonnes compared with 78,822 tonnes a month earlier. At the end of January, inventories amounted to more than 23 days of demand.

Poor demand has ensured that they continued to rise in early February and are now around their highest since mid-1995.

BHP Billiton may close Yabulu nickel plant -analysts

Thu Jan 22, 2009 7:12am GMT

SYDNEY, Jan 22 (Reuters) - BHP Billiton (BHP.AX: Quote, Profile,Research), the world's top miner, may suspend operations at its Yabulu nickel refinery indefinitely after completing a study on its future in the first half of 2009, analysts said on Thursday.

The high-cost refinery on Australia's northeast coast faces possible closure because of poor prices, which would take a further 25,000 tonnes of metal out of the global supply.

Yabulu's output is already being cut by about 50,000 tonnes a year following BHP's Wednesday announcement of the closure of its Ravensthorpe laterite nickel mine in Western Australia, which supplies Yabulu with nickel cobalt hydroxide for processing into nickel and cobalt.

The metal's price has plunged 44 percent since Sept. 1 as the global financial crisis has worsened, while LME stocks of nickel are around their highest levels since about mid-1995.

Yabulu operations could be suspended because the high-cost refinery does not fit BHP's preference for large long-life low cost operations that stay profitable through a commodity price cycle, Brendan Harris, a resources analyst at Macquarie Bank, said.

"We have assumed that BHP has come to the same conclusion as we have, that the degree of leverage that can be generated from high-cost nickel assets has certainly been reduced as a consequence of the overhang of Chinese nickel pig iron production that sits in the system," Harris said.

Chinese stainless steel makers have been increasing the use of nickel pig iron as an alternative to refined nickel, a move that has capped any upside in nickel's price.

A BHP spokeswoman said a decision on Yabulu's future would be made once a study on its viability had been completed.

On Wednesday, BHP said it would undertake the study during the first half of this year, after moving to shut part of the refinery that treats nickel cobalt hydroxide from the mine Australia.

Harris said Yabulu was a non-material asset for BHP that processes nickel laterite ore from mines it does not own in New Caledonia, Indonesia and the Philippines.

It was expanded to a capacity of 75,000 tonnes a year to handle output from Ravensthorpe which only started production a little over a year ago.

Goldman Sachs JBWere analysts, in a research report, also said Yabulu's future was under threat.

"We believe the closure of Ravensthorpe threatens the outlook for Yabulu as an ongoing asset," they said.

Morgan Stanley, in a research report, forecast Yabulu would return to pre-expansion production of 25,000 tonnes a year by ramping down immediately. (Reporting by Bruce Hextall; Editing by Clarence Fernandez)

Προβλέψεις Νικελίου

Crisis hits nickel demand hardest

Article from: The Australian

NICKEL has been hit hard, with a long list of miners shutting down production in 2008 as prices probe record lows.

In its commodities outlook for 2009, published this week, Goldman Sachs said it expected the nickel market to be in surplus throughout its forecast period.

"Despite a brutal de-stocking in the second half of 2007 and throughout 2008, the prospects for nickel demand remain sluggish," analyst Malcolm Southwood said.

London Metal Exchange nickel fell to a low of $US11,100 a tonne yesterday. The metal had rallied as much as 16 per cent since the start of 2009 and hit a two-month high of $US13,550 this week, but it closed at $US11,545 a tonne, down from $US12,300.

Nickel prices dropped more than 50 per cent in 2008 and LME warehouse stocks fell 108 tonnes to 78,804 tonnes, but are still close to their highest level since July 1995.

Despite a small rally in the past week, there had not been any turnaround from stainless steel manufacturers, one analyst said.

"Any rally is premature and we are forecasting the first quarter to be very weak across the base metal sectors," he said.

"Nickel is the most leveraged to economic activity. When the stainless steel industry is doing well, the economic prospects are good, but it is equally bad when the outlook is poor."

Mincor Resources, Australia's third-largest nickel producer, has shut its Miitel mine. Mining giant Xstrata has cut its nickel production, Consolidated Minerals has axed staff at its Kambalda nickel mine and Minara Resources laid off 200 workers at its Murrin Murrin mine in July, shelving a $300 million expansion.

Norilsk Nickel has put its Waterloo and Silver Swan nickel mines in Western Australia into care and maintenance. Its Cawse nickel laterite operation in the same region was suspended indefinitely in October after being shut in June.

Norlisk Nickel

Με 50% η Ρωσία στην Norilsk Nickel μετά τις εξελίξεις με Potanin
ΜΟΣΧΑ (Dow Jones)-- Το 50% των μετοχών της μεταλλευτικής βιομηχανίας Norilsk Nickel κατέχει πλέον το ρωσικό Δημοσίο. Όπως αναφέρει η εφημερίδα Vedomosti, επικαλούμενη ανώνυμες πηγές της εταιρείας, ο συνιδιοκτήτης της Norilsk Nickel,  Vladimir Potanin,  είχε χρησιμοποιήσει κάποιες από τις μετοχές της εταιρείας ως εγγύηση δανείου που είχε συνάψει με κρατική τράπεζα. Ο δισεκατομμυριούχος Potanin, που κατέχει περίπου το 30% των μετοχών της Norilsk, χρησιμοποίησε το 20% περίπου για εγγύηση σε δάνειο 3 δισ. δολαρίων που πήρε από την κρατική τράπεζα VTB, βάσει του ίδιου δημοσιεύματος. Τον περασμένο μήνα, τα ρωσικά μέσα ενημέρωσης ανέφεραν ότι η UC Rusal είχε υποθηκεύσει 25% των μετοχών της Norilsk στην κρατική αναπτυξιακή τράπεζα VEB. Η κυβέρνηση δεν σκοπεύει προς το παρών να διεκδικήσει τις μετοχές, σύμφωνα με την εφημερίδα.

Cuba: Nickel again earned more than tourism in '08

HAVANA (AP) — Cuba produced 70,400 tons of nickel in 2008, helping the industry surpass tourism as the communist-run island's top source of revenue for the second consecutive year, state media reported Monday.

The government news agency Prensa Latina said nickel "again achieved economic superiority over tourism," but did not release reliable figures on how much the industry made.

Neither has the government released exact tourism revenue. But in 2008, the industry recorded a 9.3 percent growth in foreign visitors, setting a new tourist record and almost certainly generating more than the $2.2 billion it made in 2007.

Cuba is the world's sixth-leading producer of nickel and cobalt. The government announced last year that for the first time, nickel had exceeded tourism as the island's top economic driver. But it has never been entirely clear by how much nickel is outpacing the vacation industry.

Prensa Latina said nickel production remained strong in 2008, despite a drop in the metal's international value from $53,000 per ton to $9,000 per ton due to the global financial crisis.

Nickel is an essential ingredient in stainless steel and in electronics, including computers, monitor screens and other appliances.

The U.S. embargo prohibits American companies from purchasing nickel and other Cuban products, but the island is an important supplier for China and Canada.

Jinchuan to increase nickel output in 2009 despite dull market

Jinchuan Group Limited has announced that it would expand its production scale so as to lower costs in 2009, in spite of the dull nickel and copper market. In 2008, Jinchuan Group realized operating revenue of CNY 53.6 billion, slightly more than 2007, with fewer profits on year due to the slump of nickel and copper prices. In 2007, the company reached operating revenue of CNY 52.1 billion, up by 47.18% YoY, with profits of CNY 7.9 billion, up by 97.5% YoY. In October 2008, the average price of nickel contract for March 2009 delivery at LME had dropped by 63% from the beginning of the year. Jinchuan Group decided to cut its annual nickel production plan from 120,000 tonnes to 100,000 tonnes. Under the consideration of expanding scale to cut costs, Jinchuan Group plans to produce 125,000 tonnes of nickel, 400,000 tonnes of copper, 7,800 tonnes of cobalt and 2.1 million tonnes of chemical products in 2009. Mr Li Yongjun chairman of Jinchuan Group said that "The primary task is to expand scale and cut costs, and keep growth of the operating revenue." Jinchuan Group is able to maintain its profits on a certain level at times when product prices decrease, since it owns a number of nickel and copper mines. Jinchuan raised its nickel factory price by CNY 5,000 to CNY 87,000 per tonne for the first time in the past half year, on market rebound. (Sourced from www.chinamining.org)