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Global oversupply forces BHP to stop nickel production in Australia

Global oversupply forces BHP to stop nickel production in Australia

Commodity giant BHP announced on Thursday that it would halt production at its nickel plant in Western Australia, citing a global oversupply on the nickel market.

The decision followed a review of its Australian nickel activities, which BHP initiated in February.

The group said nickel prices have fallen sharply over the next half decade, driven by strong growth in alternative, low-cost nickel supplies, and the decision to suspend will not be reviewed until February 2027.

“Since BHP announced a review of Western Australia Nickel in February, we have been exploring options to contain losses in the short term and find a viable path for the future of the company.

“Like others in the Australian nickel industry, we have been unable to overcome the significant economic challenges created by a global oversupply of nickel,” said the president of BHP Australia. Geraldine Slide track.

The transition period will begin this month and operations will cease in October. The handover activities for the temporary closure will be completed by December.

During the temporary suspension, BHP will cease mining and processing operations at the Kwinana nickel refinery, the Kalgoorlie nickel smelter and the Mt Keith and Leinster operations, as well as development of the West Musgrave project.

The Company will continue to invest in exploration to extend the life of the Western Australia Nickel resource and maintain optionality.

During the suspension, BHP will support its workforce and local communities. The company has committed to investing approximately A$450 million annually to support a potential restart of Western Australia Nickel.

Slattery said Western Australia Nickel’s production workers would be offered alternative employment at BHP or the choice of redundancy.

The company will establish a A$20 million community fund to support local communities during the temporary suspension.

BHP noted that since the 2020 financial year, the company has invested approximately A$4.4 billion to maintain Western Australia Nickel as a going concern and refocus its production on the battery and electric vehicle market.

This included building Australia’s first nickel sulphate plant to improve downstream infrastructure, building two new mines and investing in the development of two solar farms and battery storage. Western Australia Nickel recorded negative cash flow every year during this period.

Despite the significant capital investment, lower global nickel prices have helped Western Australia Nickel expect earnings before interest, tax, depreciation and amortisation of approximately $300 million for the financial year ending 30 June 2024.

In February, BHP announced a $3.5 billion pre-tax non-cash impairment charge on the carrying value of Western Australia Nickel. Due to the decision to temporarily cease operations, BHP expects to record a further $0.3 billion pre-tax non-cash impairment charge as an exceptional item in its 2024 financial results.

All severance payments and other contractual costs arising from the decision to temporarily suspend Western Australia Nickel will be included in the 2025 financial results.

Slattery stressed that Western Australia remains an important investment destination for BHP globally and that investment in the state is expected to exceed A$12 billion over the next five years.

“We will continue to work with all our partners in Western Australia to drive the state’s economic prosperity.”