BHP Reassesses Nickel Strategy Amid Price Plunge

January 18, 2024

Global mining giant BHP Group is reevaluating its nickel business plans due to the drastic fall in market prices, joining other miners in adjusting strategies to navigate the industry's downturn.

- Price Decline: Nickel prices have halved since early 2023, as supply growth, particularly from Indonesia, has outpaced demand, including from electric vehicle (EV) manufacturers.

- Operational Adjustments: BHP is contemplating a write-down of its nickel assets and has initiated spending cuts at its Nickel West operations in Western Australia. This response mirrors the company's acknowledgement of both cyclical lows in pricing and structural changes in the nickel industry.

- Market Challenges: The nickel market is currently burdened with oversupply. This issue is compounded by stagnating EV sales growth in key markets like the U.S., affecting demand for nickel, which is used in EV batteries.

- Industry Response: Other miners are also reacting to the challenging market conditions. Canada’s First Quantum Minerals has suspended operations at its Ravensthorpe mine in Australia, and Panoramic Resources’ Savannah operation faced similar fate. Additionally, IGO is preparing for further write-downs on its Cosmos project.

- Indonesian Production Impact: Indonesia’s low-cost nickel production, which has significantly increased its share in the EV battery market, is putting pressure on Western miners. CRU, a commodities intelligence firm, forecasts that Indonesia will account for over 80% of nickel used in EV batteries by 2027.

- BHP’s Production and Outlook: Despite the market challenges, BHP reported a 4% increase in nickel production in the six months through December 2023 compared to the previous year. The company maintains its production forecast of 77,000 to 87,000 tons for the year ending June 2024.

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