Glencore this week revealed that it had reduced nickel and ferrochrome production guidance owing to operational constraints. Full-year nickel guidance was lowered by 9% from 112kt Ni to 102kt Ni, which was attributed to maintenance outages at the Sudbury smelter in Canada alongside a longer-than-expected recovery from 2022 strike action at the same operation. It also reflects a lower full-year revision for its Koniambo ferronickel smelter in New Caledonia. Glencore’s third-quarter production report shows the company’s year-to-date nickel output from own sources totalled 68.4kt Ni, down 16% y-on-y.
The Koniambo Nickel SAS (KNS) business continues to struggle financially and incurs significant losses largely relating to cost structures in New Caledonia and general market conditions. Back in September, Glencore informed the board of KNS that it would only provide funding for KNS until 29 February 2024.
The LME nickel price continued its downward trajectory through Q3, averaging US$20,342/t during the quarter. Although normalising from the unsustainable highs that existed through much of 2022 and early 2023, prices are being weighed down by weak end-use demand, driven by China’s below-par economic performance. The market is also pricing in the oversupply that exists for nickel at present owing to the wave of nickel pig iron (NPI) and nickel intermediates flooding out of Indonesia.
Glencore’s significant adjustment to its annual ferrochrome guidance has seen its production target reduced from 1,300kt to 1,200kt, in alignment with its Glencore-Merafe joint venture. The third quarter report reveals a substantial 51% decrease in production volumes compared to the previous quarter and a 52% decline y-on-y. This sharp decline in production is attributed to a combination of factors. First is the challenging market conditions that prevailed during the period, impacting the overall production output. Secondly, the production figures were affected by the increased number of smelter offline days during the South African winter months. These unplanned smelter shutdowns and maintenance activities further contributed to the decline in production during Q3.
Despite facing higher input costs, particularly in relation to chromium ores, ferrochrome prices have remained at a low level. Consequently, Chinese ferrochrome producers are actively seeking alternatives to South African concentrates (although low-cost material is scarce outside of South Africa), as the current prices are significantly below the cost of production.
Source: Project Blue