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Mixed bag for Q4 nickel supply

S&P Global Market Intelligence estimates that in the final quarter of 2017, the global production of nickel slipped slightly compared with the previous quarter. Our estimate of 553,000 tonnes for the latest three-month period brings the annual total to almost 2.19 million tonnes, which is fractionally higher than the amount produced in 2016.

These estimates, contained in S&P Global Market Intelligence's latest Commodity Briefing Service on nickel, are being confirmed by corporate production reports for the December 2017 quarter. The overall picture is complicated by companies reporting a mixture of metal in mined and in refined output, with the consequent risk of double counting. Accordingly, two sets of production results have been tabulated below, without providing the possibly misleading subtotals.

As shown in the mined nickel table below, there was a mixed performance from nine leading producers, with three reporting higher production quarter over quarter and the other six seeing a decline compared with the September 2017 quarter. On a year-over-year basis, four companies saw higher mined nickel production in the December 2017 quarter and five reported lower output compared with the last quarter of 2016.

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The company reporting the largest mined production in the December 2017 quarter was Terrafame Ltd., which lifted contained nickel to 5,840 tonnes, up nearly 51% on the year-earlier period. Terrafame operates the Talvivaara nickel-zinc mine in Finland, and at the start of the quarter, the company announced its intention to apply to the government for a permit to recover uranium, aiming to start operations in late 2019. CEO Joni Lukkaroinen said that in relation to nickel and zinc production, the "financial impact of uranium recovery would not be significant, but it would improve Terrafame's profitability."

Lundin Mining Corp. and First Quantum Minerals Ltd. stand out among the companies reporting lower mined nickel. The former company's quarter-over-quarter reduction of nearly 24% brought its annual total to 22,081 tonnes of contained nickel in concentrate, down 8.4% compared with 2016. The fall in annual output from its sole nickel-producing mine, the 100%-owned Eagle operation in Michigan, was attributed to "planned mine sequencing." Lundin expects to produce 14,000 tonnes to 17,000 tonnes in 2018.

At the other end of the mined production table was First Quantum, which announced in August 2017 an intention to suspend operations at its Ravensthorpe nickel operation in Western Australia due to the persistently low nickel price. The operation was put on care and maintenance in September 2017, and the suspension took effect at the start of October 2017. CEO Philip Pascall described the decision as "disappointing," and estimated the cost to suspend operations at US$10 million, with the subsequent annual maintenance of approximately US$5 million.

Nevertheless, Pascall noted that the permitting process for the Shoemaker Levy orebody at Ravensthorpe is planned to continue, along with a regular review of market conditions for a potential restart of operations. The restart cost "should favorable conditions prevail," is estimated at US$10 million, he added.

Far more significant nickel output is contained in the refined production statements, as shown in the lower table. The seven companies reporting the largest refined nickel output displayed an even more mixed performance than those reporting on a mined-output basis, with four reporting higher output on both a quarterly and annual basis and three companies reporting lower refined nickel production.

The top two producers, Vale SA and PJSC Norilsk Nickel Co., both reported higher quarter-over-quarter refined nickel production. However, the Brazilian producer's fourth-quarter 2017 total was 7.4% below the output in the final quarter of 2016. Norilsk's fourth-quarter 2017 total was up 12.8% quarter over quarter and 13.5% year over year. This brought the Russian company's annual total to 217,112 tonnes, down 18,637 tonnes on the 2016 total despite an increase to 210,131 tonnes in its own Russian feed.

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Browse our Research Library for further analysis, including the monthly Nickel Briefing Service report available under the Commodity Briefing Service publication type.

The commodity profile for nickel includes various resources, including estimates of the top-producing companies and projects for 2016 as well as the price chart for London Metal Exchange-Nickel.