Nickel production will continue to decline in 2016

The sharp decline in demand from China continues to keep nickel prices under pressure. The metal fell to nearly 13-year lows of $ 7,900 a tonne on the London Metal Exchange (LME). This price level was in April 2003.

The fall in nickel prices was mainly due to the decline in steel production in China. The latest data released by the China Iron and Steel Association (CISA) indicates that in December 2015, Chinese production fell 7.2 percent from the previous month. Nickel prices fell nearly 42 percent for the entire 2015 and declined nearly 8 percent in the last month. In addition, nickel was at its worst in 2015 and continues to this day.

Low prices for finished steel and raw materials have forced many factories and mines to close their operations, leading to layoffs of workers. Panoramic Resources, which closed its Lafranchi nickel mine a few months ago, also announced it will suspend operations at its Savannah mines. In addition, Anglo American plans to withdraw from its Brazilian nickel assets and sell its core assets.

If LME nickel prices continue to hover below $ 1000 /t, the price of mid-grade ore is likely to fall below $ 20 /t. If this happens, many nickel miners will have to close their mines, as their operating costs are more than $ 20 per tonne. A similar scenario awaits nickel miners in the Philippines, which supply nine-tenths of China's nickel ore imports since the Indonesian government banned exports in January 2014.

Joseph S. Si, chairman of the Global Ferronickel Holding, said the majority of shipments from the Philippines are low-grade ore, and China cut orders for such minerals in 2015. However, he said that high-grade ore will remain in short supply, as it represents only about 15 percent of Philippine nickel exports.