Eramet Lowers 2024 Manganese and Nickel Production Targets, Shares Plunge
Eramet, the mining group, announced that it will not meet its 2024 manganese and nickel production targets. This news caused a sharp decline in the company's stock price, which fell by 14% on Wednesday, October 16, reaching €56.7 and making it the biggest decliner in the SBF 120 index.
Eramet revised its manganese production forecast to between 6.5 million and 7 million tonnes, down from the previous estimate of 7 to 7.5 million tonnes. The decrease is attributed to lower demand from Chinese manufacturers. An imbalance between demand from China’s steel sector and an oversupply of low-grade ore, particularly from South Africa, has negatively impacted the market. High-grade ore produced at Eramet's Moanda mine in Gabon has also faced challenges due to this market imbalance.
Nickel production has also been revised downward, following a lower-than-expected permit issued by the Indonesian government. Eramet’s local subsidiary, PT WBN, reduced its forecast for export volumes to 29 million wet tonnes (Mth), compared to the previous expectation of 40 to 42 Mth. In 2023, Eramet's nickel ore production in Indonesia had reached a record 36.3 Mth.
The impact of these revised targets, coupled with market challenges, has raised concerns about Eramet's medium-term outlook. In addition to the manganese and nickel setbacks, the company previously lowered its lithium production target for 2024 due to delays at its Centenario site in Argentina. Originally expected to start production in the summer, the site is now scheduled to begin operations in November, with production anticipated to reach around 1 kiloton-LCE by 2024.
Despite these setbacks, analysts at Oddo BHF remain cautiously optimistic, noting that Eramet's assets are well-positioned on the cost curve and that the company still has good prospects for expanding production in the short and medium term. However, they have lowered their price target for Eramet shares from €126 to €109.
