Glencore Cuts Ties with Major Nickel Mine Amid Market Downturn
Glencore has decided to divest its 49% interest in a significant nickel mining operation, marking an exit that includes a $4 billion (£3.2 billion) investment write-off. This move comes shortly after the company adjusted its performance outlook downwards due to a declining global nickel market.
The stake in the Koniambo nickel mine was acquired through Glencore's purchase of Xstrata ten years ago. Since then, Glencore has managed the operation on behalf of Societe Miniere du Sud Pacifique, under the oversight of the French government, which governs the territory where the mine is located.
Despite the investment and efforts to improve productivity and reliability at the Koniambo mine, the project has struggled to achieve financial and production targets. High operating costs and unfavorable market conditions have led Glencore to conclude that the mine no longer fits within its portfolio strategy.
The challenge of making the Koniambo Nickel business cost-effective and reliable has been a long-standing issue for Glencore, with the company acknowledging the financial struggles and significant losses incurred by the project. These difficulties are attributed to external factors, including cost structures and market dynamics.
The French government has shown support for the project, offering €200 million (£171 million) to aid its continuation and expressing full commitment to securing a new investor for the mine.
Nickel, essential for electric vehicle production, has attracted significant investment in recent years. However, the anticipated demand surge has not materialized, leading to an oversupply in the market. Major nickel producers, including China and Indonesia, have reduced output by up to 100,000 metric tonnes this year in response to the glut, with total industry cutbacks removing approximately 230,000 tonnes or 6% of this year's potential supply.
Despite these efforts, the market remains oversaturated, compelling Glencore and other miners to scale back operations. Glencore has reported lower production across its key metals portfolio in 2023 and anticipates similar challenges in 2024. Last year, the company produced 97,600 tonnes of nickel, falling short of its forecast, with an expected decrease in production for the current year.
