Output from top primary nickel producers drops in Q1'21

Output from the top five primary nickel producers declined year over year by 9.0% in the first quarter, with the leading companies producing 13,575 tonnes less nickel.

PJSC Norilsk Nickel Co., BHP Group, Glencore PLC, Vale SA and PT Vale Indonesia Tbk each reported lower primary nickel production levels during the three-month period, compared to the first and fourth quarters of 2020.

Norilsk Nickel maintained its ranking as the world's leading primary nickel producer in the first quarter, despite reporting 20,989 tonnes less quarter over quarter. The Russian company said the temporary suspension of mines from flooding caused the dip in nickel output. It recorded the biggest quarter-over-quarter production decrease of the top five primary nickel producers, declining by 31.5%.

However, Norilsk Nickel announced May 13 that ore mining had resumed at full capacity at its underground Oktyabrsky mine, producing 14,100 tonnes per day. The company had partially halted production at the mine in February because of flooding. The Taimyrsky mine will also be restored to operation in June after maintenance, according to the company's May announcement.

"That is the main factor in the overall top five producers of primary nickel having a decline in production in the first quarter," S&P Global Market Intelligence analyst Jason Sappor said of the flooding incident at Norilsk Nickel's mines. "Because of what Norilsk experienced, they had to lower 2021 production guidance."

Norilsk Nickel expects to produce between 190,000 tonnes and 200,000 tonnes of nickel from its Russian feedstock in 2021, according to its first-quarter earnings report.

The company confirmed plans in April to boost production capacity at the Finland-based Norilsk Nickel Harjavalta Oy nickel refinery in an effort to capitalize on the rise in demand for battery metals in Europe.

Vale also recorded a slowdown in quarterly nickel production, with output during the first three months of the year tumbling by 15.8% quarter over quarter, and by 6.2% year over year. The company produced 31,702 tonnes of primary nickel in the March quarter, excluding third-party feeds and output from its 44%-owned Vale Indonesia subsidiary.

Rising demand from the electric vehicles sector could bode well for the Brazilian mining giant's base metals operations, prompting executives to weigh additional opportunities for its nickel units, Mark Travers, Vale's executive director of base metals, said during an April 27 earnings call.

"In the end, we're looking to build up to about 30% to 40% of our class-one nickel going into the [electric vehicle] space," Travers said.

Following protests and regulatory reviews, Vale subsidiary Vale Canada Ltd. wrapped up the sale of its stake in Vale Nouvelle-Calédonie SAS on March 31. Vale Nouvelle-Calédonie owns the Goro nickel-cobalt complex in the French territory of New Caledonia and Vale held a 95% interest in the unit, with Societe de Participation Miniere du Sud Caledonia SAS owning the remainder.

Vale also said June 1 that it would suspend operations at its Sudbury facilities in Ontario due to a union strike. "Sudbury produced 43,200 tonnes of nickel in 2020," Sappor said. "The strike could have a negative impact on Vale's future output, depending on its duration."

Nickel output from the separately ranked Vale Indonesia unit also slipped, with first-quarter production decreasing 13.7% year over year to 15,198 tonnes. Vale primarily attributed the decrease to expected refinery maintenance. Overall, parent company Vale expects to produce 200,000 tonnes of nickel in 2021, based on its December 2020 guidance.

First-quarter primary nickel production for mining behemoth Glencore totaled 25,200 tonnes, decreasing by about 3,000 tonnes or 10.6% compared to the first three months of 2020.

Glencore executives also spoke to their optimism about battery metal markets including nickel, as electric vehicle penetration rates soar. In addition to nickel, the company holds significant cobalt assets. Glencore expects to produce 112,000 tonnes to 122,000 tonnes of nickel in 2021, after producing 110,200 tonnes in 2020, which was a 9% year-on-year decrease.

"We believe Glencore is well set up to supply these commodities that the world needs in this new net-zero emissions future," CEO and Director Ivan Glasenberg said on an April 22 earnings call.

BHP Group's production of primary nickel fell by 500 tonnes year over year, and by 3,600 tonnes quarter over quarter, in the first quarter of 2021. The company did not change its annual forecast of primary nickel production in 2021, retaining guidance of 85,000 tonnes to 95,000 tonnes.

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Top 5 mined nickel producers' output drops 3.8% YOY

Meanwhile, the top five producers of mined nickel reported output totaling 26,697 tonnes in the first quarter, about 3.8% less than the same quarter of 2020.

Terrafame Oy recorded the largest production drop in the group, with output declining 12.9% year over year to 7,286 tonnes. Nonetheless, Terrafame remained the leading mined nickel producer in the three-month period. The company operates the Terrafame mine in Finland and is a subsidiary of Terrafame Group Ltd., which is owned by the Government of Finland.

Ontario-based producer Lundin Mining Corp. showed the largest gains of the top five producers, with mined nickel output surging 49.8% year over year to 5,354 tonnes, largely due to a strong performance at its Eagle mine in Michigan.

Market Intelligence analysts anticipate global primary nickel demand could accelerate in 2021, especially in the second half, as many economies recover from the COVID-19 pandemic worldwide. Production will likely follow suit, with analysts recently estimating 55,000 tonnes of nickel surplus in the market for the year.

The average London Metal Exchange three-month nickel price could rise by 24% year over year to $17,240 per tonne in 2021, according to Market Intelligence predictions released in late May.

China-based Tsingshan Holding Group Co. Ltd. announced plans March 3 to process nickel pig iron into high-grade nickel matte, ultimately to produce nickel sulfate for use in electric vehicle batteries. The plan rattled nickel markets over the possible prospect of oversupply.

"The outlook for primary nickel production is expected to grow this year, mainly because of Tsingshan's operations in Indonesia," Sappor said. "For 2021, we're expecting Indonesia's output to grow — just based on the most recent numbers — from 630,000 tonnes last year, to 950,000 tonnes in Indonesia as a whole. That is going to be largely on the back of what Tsingshan is doing."

Market Intelligence analysts recently increased their 2021 Indonesian primary nickel demand forecast to 300,000 tonnes, an increase of 35,000 tonnes, to account for the growth of the stainless steel industries in the country.