Thousands of Jobs At Risk: Nickel Industry on Life Support Amid Flood of Indo-Chinese Supply

Western Australia Premier Roger Cook is scrambling to deal with the potential closure of another major nickel mine, as global prices plummet.

A view of a new nickel sulphate plant that global miner BHP Group is building at its Nickel West operations at the south of Perth in Australia on Aug., 2, 2019. Melanie Burton/Reuters

Australia’s nickel industry is in danger of collapse as Indonesia—with Beijing’s support—ramps up supply, causing prices to fall sharply.

The situation has forced mining giant BHP to write down the value of its nickel business to zero, warning that a full suspension of business activity was possible, placing 3,000 jobs at risk.

BHP’s Kalgoorlie smelter is at the centre of the Western Australian (WA) nickel industry, with miners such as IGO Limited and Andrew Forrest’s Wyloo selling their raw nickel into BHP’s smelter supply chain.

This smelter will now be placed into “care and maintenance” in June, after Wyloo’s decision to suspend its Cassini and Northern Operations mines from May. The rapid demise of Australia’s nickel industry has largely centred on WA and has resulted in nearly 1,200 job losses in recent months.

BHP on Feb. 15 warned investors of “unfavourable” market conditions and said it expects those to continue for a considerable time, with the entire Nickel West division potentially facing a shutdown after its business lost $308 million (US$200 million) over the past six months.

Shares in the miner fell 1.9 percent or 86 cents to $45.09 in afternoon trade.

“This is an uncertain time for the Western Australian nickel industry and we are taking action to address the current market conditions,” BHP CEO Mike Henry said.

Several Mines Already Closing, With More to Come

The possible closure of the entire nickel division could undermine billions of dollars of investment that the company was expected to invest in growing its WA nickel division.

Responding to the BHP announcement, WA Premier Roger Cook said it was “extremely concerning,” and called on the federal government to add its support to state government efforts.

The WA government is expected to provide royalty relief to nickel miners, though that may come too late since, in addition to Wyloo’s suspension of operations, closures have also been announced for the Savannah mine in the Kimberley and IGO’s Cosmos project.

Australian Prime Minister Anthony Albanese (C), Japanese Prime Minister Fumio Kishida—and BHP CEO Mike Henry (R)—hold jars of nickel sulphate during a visit to the BHP Nickel West Kwinana Nickel Refinery in Perth, Australia on Oct. 22, 2022. Richard Wainwright - Pool/Getty Images

Glencore will decide on the future of its Murrin Murrin nickel mine next week, after the Swiss miner shut its New Caledonian nickel business last week.

Mr. Cook said the state government was “looking at all options in terms of how we can support the industry,” including companies with operations already mothballed and those with significant capital investment at stake.

This is a “significant structural disruption” to the industry and supply chain, not merely the usual boom-bust cycle in mining, he said.

“So it will not only need the state government, it will need government at all levels to do the heavy lifting to make sure we can assist the industry deal with these global trends,” the premier said.

No Short-Term Solutions in Sight: Federal Minister

Federal Resources Minister Madeleine King has so far not committed to any bail-out, saying the challenges gripping the domestic nickel industry “cannot be addressed overnight.”

“BHP’s commercial decisions reflect the complex set of issues facing the industry around the world, but particularly in Australia with its high level of environmental, social, and corporate governance standards,” she said.

WA Liberal spokesperson for state development, David Honey, said BHP’s nickel business signalled “the end of any possibility of establishing lithium-ion battery manufacturing” in the state.

Nickel prices have halved over the past year in response to slower-than-expected sales of electric vehicles and due to Indonesian miners flooding the market. BHP warned in January that the sector faced “structural” difficulties, rather than temporary “cyclical” challenges.

Benchmark Mineral Intelligence has predicted an oversupply of nickel until 2028.