The Sudbury Star is the City of Greater Sudbury’s daily newspaper.
As senior mining analyst at Salman Partners, an investment dealer, Raymond Goldie keeps a close eye on the nickel industry. But he’s finding it difficult to keep tabs on Vale, one of the world’s largest nickel producers.
That being said, Goldie is predicting Vale could be planning a production shutdown because of the low price of nickel. Nickel has fallen to below $7 a pound, something that could prompt other companies such as Xstrata Nickel and Norilsk to cease production for awhile as well, he said.
Vale spokeswoman Angie Robson said a planned maintenance shutdown is now underway at the company’s Greater Sudbury operations. Robson said the company has no other plans. “We don’t speculate on rumours, but there are no plans to shut down operations,” she said.
Goldie and other mining analysts who used to follow the former Inco Ltd. closely are finding it more difficult to do that now that it’s owned by the Brazil-based mining giant. “I think it’s just because nickel is one little bit of a huge company,” Goldie said, “and so they’re not obliged to give us much disclosure.”
Inco used to release information every year about how much it mined at each mine, what the grades were and what their expectations were, “and Vale doesn’t do any of that,” he said.
The last time nickel prices dipped below $7.50 a pound, Vale was in the middle of a rancorous strike with about 3,000 production and maintenance workers who were members of United Steelworkers Local 6500 in Sudbury and Local 6200 in Port Colborne.
So, it was “a bit confusing” to tell what their response was to low nickel prices, said Goldie.
“The company clearly wanted a strike and when the strike was over, they continued the shutdown,” he said.
Goldie said officials with Vale and Xstrata Nickel believe when you’re in the commodities business, “you don’t worry about how much nickel you sell, you don’t worry about what market share you have, you worry about the price you get.
“Vale would rather sell a million pounds at $10 (a pound) than sell two million pounds and lose money, and that’s why they cut production.”
The old Inco operated differently, he said. Goldie said Inco officials essentially said: “‘We’re a low-cost producer, so we’ll just run flat out and drive those other bastards into bankruptcy,’ and it never worked out that way,” he said. “Inco lost money. Everyone did.”
Vale is more determined to match its production to demand for nickel.
Another top mining analyst said he believes it’s highly unlikely Vale would shut down its nickel operations due to falling world prices and declining demand. Stan Sudol said Vale is spending $2 billion on its Clean AER (Atmospheric Emissions Reduction) project in Greater Sudbury to modernize the smelter complex.
The company also just hired two dozen new apprentices for its local operations. That’s a sign of continued production plans, Sudol said.
“It’s a very funny time. We’re still in a commodity supercycle. The last one occurred from the late ’40s to the late ’70s. But, in that timeframe, it wasn’t all boom. You had periodic busts, but the trend was always up.
“We have to remember we just went through the Chinese having 10-15 years of double-digit growth. The Chinese now have to take a bit of a breather. But it doesn’t mean is they are struggling. You are looking at the biggest rural-urban migration in the history of mankind. It’s not slowing down.
“There’s going to be an emerging middle class with demands for products like cars and stainless steel sinks. It’s happening in India, as well. It all takes metal.”
However, Goldie and other analysts are less optimistic, at least in the short term. He said other nickel companies, such as Liberty Mines near Timmins, have stopped production because of low nickel prices. Goldie said he is looking at other large producers to follow suit.
Xstrata Nickel has said it is cutting costs instead of production, said Goldie, although officials haven’t said how they have done that.
With nickel below $7.50 a pound, “you can’t even tell whether Vale’s making money or losing money at this point” because of the lack of information available from the company, which now trades on the London Stock Exchange. In contrast, the former Inco used to trade on the Toronto Stock Exchange.
For the rest of this article, please go to the Sudbury Star website: http://www.thesudburystar.com/2012/08/20/vale-says-no-plans-to-shut-down-operations