What’s wrong with nickel?

Nickel hasn’t begun 2024 on the right note, with prices teetering above $US16,000 ($23,820) per tonne on the London Metal Exchange (LME) – lows not seen since early 2021.

This has been to the detriment of Panoramic Resources – a nickel producer which went into administration in mid-December with the hope of continuing operations as FTI Consulting found a new suitor.

While a 10,000-tonne nickel shipment was made on January 3, with a new buyer yet to be found, administrators have made the decision to halt operations at Panoramic’s Savannah nickel mine in the Kimberley region of Western Australia. This will see 140 Panoramic staff stood down.

“While it was our intention to continue to trade-on the Savannah nickel project and preserve the employment of the operating team as we explored opportunities for a sale or recapitalisation of Panoramic’s business, after consultation with major creditors and key suppliers it is apparent that the prospect of achieving a near-term turnaround of operations and finances is low,” FTI Consulting said.

Faltering nickel prices have been primarily caused by a supply surplus, with Indonesia responsible for increased supplies of Class 2, lower-grade nickel, while China is responsible for increased supplies of Class 1, higher-grade nickel.

Class 1 nickel is refined to create nickel sulfate for use in electric vehicles (EVs). Class 2 nickel is predominantly used in steel.

Many of Australia’s nickel producers pride themselves on producing nickel sulphides – a Class 1 product for the EV market. This includes Wyloo Metals and its Kambalda operations in WA.

But no operation appears safe, with decreasing prices compounded by escalating costs in the wake of inflationary pressures.

This sentiment was highlighted by BHP Nickel West asset president Jessica Farrell in December, who shed light on current market hostility to The Australian Financial Review.

“We are working hard to remain globally competitive in a very tough operating environment,” she said. “Costs have risen sharply and continue to go up while prices have fallen as new supply comes into the market.”

The Nickel West operations in WA employ more than 2500 people, with Wyloo’s Kambalda operations one of Nickel West’s suppliers.

While the global nickel market has been beset by rising supplies, demand continues to increase from the EV sector, with consumption of Class 1 nickel on the rise and set to drive rising prices in the long-term.