BHP Halts Nickel Mine: 'We're Not Able To Overcome Economic Challenges Driven By Oversupply'

BHP Group BHP, the world's largest miner, suspended its Western Australia nickel operations due to a significant decline in nickel prices and a global oversupply. This decision lingered since First Quantum's Ravensthorpe mine shut down in the same region in April.

"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," stated Geraldine Slattery, BHP's Australia President. 

The company plans to offer redeployment opportunities to its 2,500 employees affected by this decision, providing them with roles within BHP's other operations or offering redundancy packages.

The suspension, effective in October, will halt mining and processing operations at BHP's Kwinana nickel refinery, Kalgoorlie nickel smelter, and the Mt Keith and Leinster operations. The development of the West Musgrave project will also be paused.

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BHP has outlined plans to implement a care and maintenance program. Its $300 million annual budget is to ensure these facilities’ ongoing safety and integrity, pending a potential restart. The company has also established a $13.6 million fund to support local communities and businesses impacted by the shutdown.

Still, Perth-based analyst Tim Treadgold offered his perspective for ABC News. He called the decision "very close to being the death knell" for the Australian nickel industry.

“People say that the Indonesian nickel is dirty nickel, [but] that doesn’t seem to worry the electric car makers,” he said, clarifying that BHP's plan to restart operations in 2027 could face challenges owing to aged infrastructure in need of serious investment.

Nickel, crucial for electric vehicle batteries, has faced a turbulent market. Australian producers struggle to compete with Indonesia’s lower-cost and higher-volume output. Political unrest in New Caledonia recently caused a temporary spike in nickel prices, but they remain significantly lower than last year’s levels.

This oversupply situation has been exacerbated by high production and labor costs in Australia. Meanwhile, Indonesia has cheaper, albeit more environmentally damaging, production methods. 

Despite the suspension, BHP maintains a positive long-term outlook for nickel demand, particularly for metal produced with lower greenhouse gas emissions.

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