Production from the top five primary nickel producers plunged 24.1% year over year in the second quarter as an array of hurdles from labor disputes to maintenance and flooding slowed production.
However, higher nickel prices shielded some of the leading companies from significant financial loss. And the volume of production from mining operations, such as ore and concentrates, recovered during the June quarter, with the top five producers of mined nickel increasing output by 28.0% year over year.
Top nickel producers PJSC Norilsk Nickel Co., Vale SA, Glencore PLC, BHP Group and PT Vale Indonesia Tbk all reported lower primary nickel output during the three-month period, compared to the second quarter of 2020, according to an S&P Global Market Intelligence analysis. Primary nickel comprises production from mined sources and includes refined nickel, nickel pig iron, ferronickel, and nickel matte.
Russia-based Norilsk Nickel booked a 43.3% year-over-year drop in production in the June quarter while maintaining its ranking as the world's No. 1 producer of primary nickel. The company linked production losses in the first half of 2021 to the temporary shutdowns of the Oktyabrsky and Taimyrsky mines in Russia after flooding.
Those two mines have been partially restored. The Oktyabrsky mine returned to full capacity in May, and the Taimyrsky mine has been operating at 80% capacity since June, according to a second-quarter earnings report.
Norilsk Nickel also suspended its Norilsk concentrator when the collapse of an ore transfer point and walkway in February led to three fatalities, bringing the mining and metallurgical company's total fatalities to five so far this year, according to the company's second-quarter financial report.
Nevertheless, Norilsk Nickel expects to make up for lost ground in the near future. Company executives forecast nickel demand climbing 15% year over year and 11% in 2022, a trend "primarily driven by stainless steel production in China and Indonesia, continuing demand growth in the battery sector and a moderate recovery of other non-stainless industries," the company said in an Aug. 5 report.
Market Intelligence analysts expect China's primary nickel consumption to increase 9% year over year to 1.53 million tonnes in 2021, mainly from the stainless steel and electric vehicle manufacturers in the country.
Vale also recorded a slowdown in quarterly nickel output, with production during the period tumbling 20.4% quarter over quarter and 12.1% year over year. The company produced 25,152 tonnes of primary nickel in the June quarter, excluding third-party feeds and output from its 44%-owned Vale Indonesia subsidiary.
A labor strike that started June 1 at Vale's Sudbury operations in northeastern Ontario captured headlines and stalled nickel production. The site, which is made up of five mines, a mill, a smelter and a refinery, produces nickel as well as copper, cobalt, gold, silver and platinum group metals. The company reached a tentative agreement with the workers' union Aug. 3.
The protracted labor dispute cost Vale about $59 million in additional expenses during the second quarter, according to company financial documents. Unexpected maintenance at the Clydach nickel refinery in the U.K. also slowed production of the metal, the company reported.
"The Sudbury strike, combined with non-strike-related disruptions in New Caledonia and Russia this year and the recovery in global nickel demand, has contributed to a tightening in the global primary nickel market in 2021," Market Intelligence analyst Jason Sappor said. "Although Sudbury resumed operations on Aug. 9 following the agreement, the plant is not expected to be fully operational until the fourth quarter as there are maintenance works at the facility that need to be completed."
Nickel output from the separately ranked Vale Indonesia subsidiary also tumbled, with second-quarter production falling 19.5% year over year to 15,048 tonnes. The company primarily attributed the decrease to maintenance. It also announced plans in late June to expand by forming a joint venture with a China Baowu Steel Group Corp. Ltd. subsidiary and Shandong Xinhai Technology Co. Ltd. Together, the companies will start the Bahodopi nickel processing facility in Indonesia to produce nickel pig iron.
China-based Tsingshan Holding Group Co. Ltd. said in March that it would use nickel pig iron, a material often used in stainless steel, to manufacture high-grade nickel matte and consequently nickel sulfate for batteries. The announcement sent nickel prices and supply forecasts spinning.
The world's anticipated pivot to electric vehicles could lead to a surge in demand for nickel, a metal installed in several types of EV batteries.
Market Intelligence analysts have forecast that global nickel consumption from passenger plug-in EVs could reach 453,000 tonnes by 2025, up from 101,000 tonnes consumed in 2020.
Glencore's nickel production slid year over year by 4,500 tonnes, or 16.7%, in the second quarter.
The Swiss mining company attributed the slump in output to planned maintenance at its Murrin Murrin nickel-cobalt operations in Australia and issues that delayed its planned return to two-line operations at the Koniambo plant in New Caledonia.
"We're also looking towards the reestablishment of two lines at Koniambo towards the end of this month," Glencore CFO Steven Kalmin said on an Aug. 5 earnings call.
Australian mining giant BHP Group recorded slightly lower June-quarter production as well, with primary nickel production slipping to 22,400 tonnes, about 1,500 tonnes less than in the second quarter of 2020.
The company announced July 22 that it signed a deal with Tesla to supply nickel from BHP's Nickel West mine in Western Australia.
The supply contract could involve upward of 18,000 tonnes of nickel annually beginning in 2022, Benchmark Mineral Intelligence estimated in a July report. The agreement is "the first public deal of its kind for a major Western automaker," Benchmark Mineral Intelligence said.
Demand for nickel from the battery sector could climb from an estimated 184,000 tonnes in 2021 to approximately 1.7 million tonnes by 2030, according to the Benchmark Mineral Intelligence report.
Mined nickel rebounds
The top five producers of mined nickel reported output totaling 29,161 tonnes in the first quarter, about 28.0% more than the same quarter of 2020.
The mined nickel output of Tokyo-headquartered Sumitomo Corp. surged from 300 tonnes in the first quarter to 5,100 tonnes in the second quarter. The company restarted its 54.2%-owned Ambatovy nickel mine in Madagascar in March after temporarily stopping production the year prior due to the COVID-19 pandemic.
Australian mining company IGO Ltd. recorded a 9.8% increase in production compared to the year-ago period from its nickel-copper-cobalt Nova mine in Western Australia. The miner forecast that Nova production will reach between 27,000 and 29,000 tonnes in fiscal 2021.
Toronto-headquartered Lundin Mining Corp. also reported an increase in output during the period, with mined nickel production jumping 41.2% year over year to 1,394 tonnes.