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Madagascar's Ambatovy restarts nickel production

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Madagascar's Ambatovy restarts nickel production

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First nickel briquettes produced March 23

Uncertain when cobalt production will begin

Not much impact expected on cobalt metal prices

London — Madagascan nickel and cobalt producer Ambatovy has restarted nickel production after a one-year stoppage, with the company announcing in a March 26 LinkedIn post that it had produced its first 99.9% nickel briquettes on March 23.

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The producer, which is a joint venture between Sumitomo Corp. (54%) and Korea Resources Corp. (KORES) (46%), announced the production halt exactly a year ago on March 26, 2020 due to national COVID-19 lockdown restrictions.

S&P Global Platts contacted Ambatovy for clarification on whether cobalt production had restarted as well, and if not, when, but received no response.

The cobalt metal market has been awaiting the return of Ambatovy's mine, with the restart long expected to take place in either February or March.

Sumitomo previously said in November 2020 that it expected production to resume early in 2021, with the aim of producing 3,000 mt of nickel over the January-March period and ramping up during the remainder of the year. The mine produced 33,000 mt of nickel in 2018.

Local Madagascan media reported two weeks ago that the mine was in the process of meeting the conditions for its reopening scheduled for later in March, with employees and subcontractors back on site.

One cobalt market participant pointed out that the normal process at any mining company would be that nickel production would come first, as the usual ratio was 10 nickel units to one cobalt unit on most ores.

A European trader said he believed cobalt production would only restart in May. Another trader agreed that it would take a while for operations to get going once the plant was restarted. However, another said he expected the miner to produce cobalt units also in March, with first production due "any day this week."

However, another market source told Platts previously that he had heard that cobalt production would restart at regular rates of around 70 mt/quarter of briquettes, which would be good for the battery market.

"This could bring prices down, but there should be enough demand for it," he added.

European cobalt metal prices have been strong in Q1 2021 due to strong demand, particularly from the battery sector.

The Platts cobalt metal assessment rose 63.8% from $15.80/lb IW Europe at the end of December to $25.875/lb IW Europe on March 10, although prices have taken a step back since to be assessed at $23.50/lb IW Europe March 25 as the market consolidated after its quick uptrend.

Limited price impact expected

"$25/lb was not sustainable. $19-23/lb is reasonable, $24 is acceptable, $25/lb is over the edge and now when the Ambatovy information will reach the market some people will regret not having sold at $23-24/lb," a third European trader said.

However, the first European trader said that the market had known for months that Ambatovy would be back this year, so the restart had already been factored into the cobalt and nickel prices.

Most market sources in Europe seemed to agree that there would be a limited downward impact on prices, with another trader also saying that demand was enough to absorb any additional volumes.

One trader told Platts previously that he had not seen any material from the mine offered until May and expected Chinese buyers to take it all, if they hadn't already.

"I don't think there'll be an impact on prices when it does come back, as there is still enough demand, but it might balance the market a bit," the trader added.

Another trader said that he did not see any reason for prices to go down further once Ambatovy returned, especially if demand from the aerospace and medical sectors came back, as was expected later in 2021 as COVID-19 vaccine rollouts continued.

"They will drive prices further up, as the market will be tighter," he said, adding that prices might stall, but he did not see them falling much.

Sherritt International was previously a third JV partner in Ambatovy and the mine's operator, but reduced its share from 40% to 12% in 2017 and then to nothing in 2020.