Column: Electric dreams turn into a nightmare for battery metals
A sector that was once racing to build new supply has been closing mines and deferring projects as low prices bite into the cost curve.
BHP (ASX, LON, NYSE: BHP) is halting its Western Australia nickel operations starting in October, as the world’s largest miner struggles to navigate challenges posed by a substantial decline in nickel prices and a global oversupply.
The mining giant, which had warned the market about this potential outcome earlier this year, said it will review its decision affecting both the Nickel West operations and the West Musgrave project by February 2027.
“Like others in the Australian nickel sector, we have not been able to overcome the substantial economic challenges driven by a global oversupply of nickel,” BHP’s Australia president Geraldine Slattery said in a statement.
BHP noted it would offer redeployment opportunities to the company’s other operations or a redundancy payout to the 2,500 employees in the division.
The company will establish a A$20 million ($13.6m) fund to support local communities and business impacted by the suspension. It has also increased its non-cash impairment by $300 million to the $3.5 billion impairment charge against the carrying value of the business, which it announced in February.
Resources Minister Madeleine King called the decision “disappointing”, noting that the federal government had worked with BHP and the broader nickel sector on policy responses to support ongoing Australian nickel production.
“We added nickel to the critical minerals list in February, making nickel projects eligible for consideration under the A$4 billion critical minerals facility,” King said in a statement.
Prices for nickel, a crucial metal for electric vehicle (EV) batteries, dropped 40% last year and have continued to experience declines in the past weeks.
Experts, including Macquarie Financial Services, say prices have likely hit a floor mainly due to the growing amount of the metal coming from top producer Indonesia. This oversupply has pushed the industry into a critical situation, as half of all nickel mines are unable to turn a profit at current prices.
Higher costs at mines in Australia have made it hard to compete with supply from Indonesia, which is more polluting and carbon-intensive. It’s one of the factors behind recent calls for ESG-related pricing for metals.
Nickel producers worldwide are taking steps to reduce the impact of the current market challenges. Anglo American (LON: AAL) is exploring options to either divest or close down its nickel division, while Glencore (LON: GLEN) has decided to suspend and sell some of its operations in the islands of New Caledonia.
BHP and other Australian producers have long been key suppliers of refined nickel, which influences prices on the LME. In January 2023, Australia accounted for 72% of the nickel in the exchange’s warehousing network, but by June this share had dropped to 29%.
