Indonesian Nickel Surge Threatens Western Australia’s Nickel Industry
Western Australia’s nickel sector faces a severe blow as cheap nickel from Indonesia floods the market, halving nickel prices in 2023 and dropping below $16,000 per tonne in December. Indonesia's nickel production skyrocketed to 49% of global supply in 2023, up from less than 5% eight years ago, according to Benchmark Mineral Intelligence.
Impact on Australian Nickel Producers
The influx has had dramatic consequences for Australian nickel producers. IGO acquired Western Areas for A$1.1 billion in mid-2022, only to write off the entire value within 18 months and suspend the Cosmos project, resulting in 400 job losses. Similarly, Wyloo Resources suspended operations just seven months after acquiring Mincor Resources for A$760 million.
First Quantum Minerals put its Ravensthorpe nickel operation on care and maintenance in April. Additionally, Panoramic Resources and Mallee Resources suspended operations at their Savannah and Avebury mines after facing financial difficulties.
In February, BHP recorded a $3.5 billion impairment charge on its Nickel West division and reported a negative EBITDA of $200 million. On Thursday, BHP announced it would suspend operations at the Kwinana nickel refinery, Kalgoorlie smelter, Mt Keith and Leinster mines, and West Musgrave development from October. More than 3,000 jobs will be affected, with BHP offering redeployment or redundancy to its 1,600 frontline employees. The decision will be reviewed in February 2027, with BHP committing $300 million annually to support a potential restart.
After the suspension, Australia will be left with only three operating nickel mines: IGO’s Nova and Forrestania, and Glencore’s Murrin Murrin, though Nova and Forrestania are due to close within the next two years. The Australian government’s Office of the Chief Economist forecasts a decline in Australia’s nickel exports from 161,000 tonnes in the 2023 financial year to 62,000 tonnes in 2026.
Nickel was first discovered in the WA Goldfields in 1966, leading to the establishment of the town of Kambalda by Western Mining Corporation (WMC). BHP acquired WMC in 2006, and Nickel West was initially profitable. However, the Global Financial Crisis reversed nickel’s fortunes, and by 2014, the business was deemed non-core.
The rise of electrification offered hope, with BHP announcing a nickel sulphate plant in Kwinana in 2020 to supply the electric vehicle industry. Despite investing $3 billion since 2020, Nickel West has been cashflow negative.
WA Premier Roger Cook and federal resources minister Madeleine King expressed disappointment but pledged support for affected workers. The City of Kalgoorlie-Boulder and smaller communities like Kambalda and Leinster face significant impacts.
Supply Chain and Market Impact
The suspension will affect customers and suppliers, including Lynas Rare Earths, which relies on BHP for sulphuric acid. Battery customers like Tesla, Panasonic, and Toyota will also be impacted. Contractors such as GR Engineering Services and Alliance Aviation Services expect revenue impacts due to the suspension.
The nickel market is expected to remain in surplus until later this decade. BHP plans to maintain investment for a potential restart, requiring significant capital, especially for upgrades to the Kalgoorlie smelter. The suspension of Nickel West will narrow the nickel surplus but solidify Indonesia’s dominance in the market.
