Australian Nickel: a short history – by Simon Cowling* (Australian Government Bureau of Resources and Energy Econmics – March Quarter 2013)

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Nickel, through its various uses, plays a large part in the development of capital infrastructure in economies worldwide. Due to its resistance to corrosion, nickel is primarily used in the production of stainless steel and alloys which are an integral ingredient for many infrastructure projects. To a lesser extent, nickel is also used in the production of nickel-metal hydride rechargeable batteries and electroplating other metals, such as steel for uses in construction and automotive purposes.

Australia is one of the largest nickel suppliers to the world market. The establishment of Australia’s nickel industry, however, has not been straight-forward and the industry has faced numerous challenges. The nickel market is characterised by extreme volatility evidenced by large and rapid swings in demand, production and, ultimately, prices. This review provides an overview of how key events in nickel markets since the 1960s have affected the development of Australia’s nickel industry.

The early days—pre-1965

The Australian nickel industry first emerged at the start of the 20th century with mining starting at the Zeehan field in western Tasmania in 1910. This followed the development of technologies that employed nickel as an alloying agent in steel towards the end of the 19th century (Mudd 2010) Between 1910 and 1938, approximately 568 tonnes of Nickel was intermittently produced from nickel copper sulphide ore extracted from the Five Mile group of mines in Tasmania (Mudd 2007).

The small and scattered nature of the deposits made the mining and extraction of nickel challenging at Zeehan. Production at Zeehan field eventually became uneconomic and although world demand for steel alloys and nickel continued to grow, nickel operations ceased in 1938 (Mudd 2007).

World consumption grew by more than 130 per cent between 1953 and 1965 as the result of
the increased use of steel in western economies (see Figure 1). As a result, the price of nickel
trended upwards from the late 1940s to the mid 1970s (see Figure 2).

Boom time—1966 to mid-1970s

Demand for nickel during the 1960s and early-1970s was driven by the steel consumption
demand associated with robust economic growth and investment in fixed capital in Japan,
Europe and the US. For example, Japan’s Gross Domestic Product grew by around 10 per
cent each year during the 1960s. Consumption of steel in the US was also driven by the
manufacturing of steel-intensive military equipment used in the Vietnam War.

Increased global demand for nickel supported Australia’s nickel industry which established
itself after a number of years of exploration. The first major event of this period was the
discovery by the Western Mining Company (WMC) of a substantial nickel sulphide ore deposit
at Kambalda, near Kalgoorlie in Western Australia in 1966. The discovery signalled the start of a
period of rapid growth in Australia’s nickel industry that coincided with a rapid increase in the
price of nickel (see Figure 2). Between 1967 and 1973 Australian nickel production increased
more than 1 400 per cent, from 2 600 tonnes in 1967 to over 40 000 tonnes in 1973. Although
global production also increased over this period, strong growth in demand and rising
production costs caused the price to rise (in 2013 dollars) from US$13 500 at the end of 1966 to
a peak of US$17 600 in 1974.

The discovery at Kambalda by WMC initiated a ‘rush’ in base metal and nickel exploration
in Australia, primarily focussed within Western Australia. Expenditure on nickel exploration
prior to the Kambalda discovery was 2 per cent of total base metals exploration expenditure,
or 1.5 per cent of total minerals exploration. This increased to more than 55 per cent of total
base metals exploration and over 30 per cent of total expenditure on minerals exploration in
1970 (Jacques et al. 2005). This equates to approximately $485 million worth of exploration
expenditure in 2013 dollars (Jacques et al. 2005).

A number of large deposits in Australia that would contribute to nickel production in the
coming decades were discovered during this first nickel boom. Of the known global resources
of nickel sulphide, more than 90 per cent were discovered during the period of 1966 to 1973
(Hoatson et al. 2006). Significant deposits in Australia that were discovered during this period
included: Mt Keith; Perseverance; Yakabindie; and Honeymoon Well. All of these deposits are
located in Western Australia.

In 1966, Canada was one of the major producers of nickel in the world. The rapid development
of the nickel industry in Australia during the ‘boom’ of the 1960s coincided with protracted
labour strikes in Canada between 1966 and 1969. Due to the labour strikes, WMC was able to
establish itself in the global nickel market with the Kambalda mine and ensure it became a
successful and profitable operation (Mudd 2007). Profits were boosted by an increase in nickel
prices and over this period Australian production of nickel ore increased by 400 per cent, to
total 11 200 tonnes in 1969 (see Figure 3). World mine production during this period grew by
23 per cent (see Figure 4).

The rocky years—mid-1970s to early 1990s

Following the first oil shock in 1973 there was a global slowdown in the nickel market that
lasted for about two decades covering the period 1975 to 1987. During this time depressed
global prices, for nearly all metals, led to a substantial decline in exploration activity. The higher
levels of world economic growth during the 1960s had, for the most part, come to an end.
Economic growth and investment in the US, Japan, Europe and Australia all slowed during
the 1970s. The end of the Vietnam War also led to a downturn in steel used in manufacturing
military materiel and contributed to a drop in the demand for nickel.

Between 1975 and 1987, Australia produced between 75 000 to 85 000 tonnes of contained
nickel per year. In 1987, global stocks of nickel fell to 92 000 tonnes (5.3 weeks consumption),
less than half the level of world stocks of 202 000 tonnes at the end of 1982 (14.5 weeks
consumption) (see Figure 5). A reduction in nickel production capacity, caused by closures
of high energy consuming operations started in the early 1970s (Ashok et al. 2004). Prices
increased from US$9900 per tonne (2013 dollars) in 1987 to US$27 800 per tonne in 1988. As
a result, the value of Australian nickel exports over the five years starting in 1988 increased
despite a decline in the production of Australian nickel.

An abrupt decline in the discovery of new nickel deposits during the ‘rocky years’ affected the
available global nickel supply. Very few major deposits were discovered in Australia between
1975 and 1987, although previously identified resources within Australia were able to sustain
Australian production during this period. Technological advancements in processing nickel
laterite ore, such as high pressure acid leaching (HPAL) and electric furnaces, were able to
contribute to an increase in production capacity. These advances made the complex process
of production of nickel from laterite ore more economically viable. The processing of nickel
laterites has historically been more expensive compared to nickel sulphides, although mining
nickel sulphide ores can be more capital intensive due to deposit depths. Australia’s nickel
focus has predominantly been on the production and export of nickel derived from nickel
sulphides due to the greater abundance of nickel sulphide resources. These technological
advancements meant that some previously discovered, but uneconomic, resources could be
extracted profitably.

Bigger, higher, longer—early 1990s to 2008

Beginning in the early 1990s the nickel industry in Australia underwent an expansion that could
be characterised as the ‘second’ nickel boom. This was driven by a number of global factors.
The emergence of China as an economic superpower in the 1990s and 2000s coincided with
a surge in fixed asset investment on steel-intensive infrastructure projects and resulted in
higher demand for nickel. Refined nickel consumption in China grew by more than 900 per
cent between 1990 and 2008. This increase in consumption encouraged investment and the
opening of new mines, both in Australia and globally.

World nickel prices began to rise steadily from the late 1990s and continued into the 2000s (see
Figure 6), with global production reaching more than 1.5 million tonnes by the end of 2006. As
a consequence of both higher prices and production, Australian nickel export values peaked in
2007 at a value of $8.1 billion (2013 dollars), with 211 000 tonnes exported (see Figure 7).

The second nickel boom, in part, was supported by further development of high pressure acid
leaching (HPAL) technology in the early 1990s. High pressure acid leaching is associated with
lower grade nickel laterite ores that were historically more difficult and expensive to process.

The outcome of this leaching process is an intermediate product for further refining which is
rich in nickel. During the first nickel boom, initial nickel ore discoveries were of a high grade and
contained approximately 4 per cent nickel (Mudd 2007). Ore grades have been gradually, but
steadily, in decline since this time. One of the drivers influencing this decline is the increasing
extraction of nickel from lateritic ores. In the late 1990s, three new laterite projects were
developed in Western Australia based on HPAL technology.

Base metal exploration expenditure also increased during the second nickel boom to levels
comparable to the first nickel boom of the late 1960s. For instance, exploration expenditure
in Australia increased 400 per cent from FY1992 to FY2008 (in 2013 dollars). This was driven
by increased global prices for nickel and the expectation of strong consumption demand
continuing into the future.

Large amounts of capital were injected into nickel mine developments in Australia. One of the
largest of these was at Nickel West’s Ravensthorpe mine in Western Australia. This investment
included a nickel and cobalt processing plant worth more than US$1.3 billion in 2013 dollars.
A number of mines started or increased production following the upswing in prices in the 2000s.

The mines, all located in Western Australia, included Murrin Murrin, Mt Keith, Silver Swan, Cosmos,
Emily Ann, and the re-opening of Kambalda. The conversion of previously sub-economic
resources to economic resources was a direct result of the upturn in the Australian nickel market.
In addition, the on-going development of HPAL technology was a contributing factor as it made
previously discovered, but uneconomic deposits, such as Murrin Murrin, economically viable.

World nickel price and production reached an historical high in 2007 and peaked at US$61 300
per tonne in 2013 dollars on 16 May 2007. World nickel production in that year also reached, a
then record high, of 1.6 million tonnes.

The peak of the boom in 2007 was largely driven by demand growth underpinned by robust
economic growth in China, and moderate growth in the US and Europe. Emerging economies,
especially China, experienced substantial increases in economic growth that increased the need
for infrastructure and stainless steel. Another key factor explaining the historically high prices
of 2007 was the existence of supply constraints. In particular, world stocks were below 150 000
tonnes from 1999 through to 2008. In response to these higher prices and reduced stocks, China
responded by increasing its use of ‘nickel pig iron’.

Nickel pig iron (NPI) I is a form of pig iron that is produced by smelting iron-rich, low grade nickel
ores, often from nickel laterite. NPI is commonly produced in two varieties, a low nickel variety
with between 4–6 per cent nickel and a high nickel variety containing 8–13 per cent nickel. This
compares to conventionally produced ferronickel which is between 25–40 per cent nickel. The
use of laterite ore provides a cheaper alternative to using the more expensive ferronickel and
refined nickel inputs. The rise of the NPI industry in China has allowed some exporting countries
to sell nickel ore without the need to build capital intensive refining facilities and has boosted
exports from Indonesia, the Philippines and New Caledonia.

The increase in the use of NPI has had a substantial impact on the Australian nickel industry. With
the emergence of NPI as a substitute for ferronickel and refined nickel in stainless steel making in
China, demand for Australian refined nickel reduced.

Peak nickel—2008 and 2009

The price and production prices of early 2000s were driven by a relative shortage of global

nickel supply. By 2007 global mine production peaked at 1.6 million tonnes and the nickel price
peaked at around $62 000 per tonne (2013 US dollars) in May of that year.

As a result of the global financial crisis (GFC), economic growth declined was and became
negative in key industrialised countries. Demand for stainless steel and nickel fell and resulted
in nickel prices decreasing by more than 40 per cent from 2007 to 2008, with a further decline
of over 30 per cent from 2008 to 2009. Numerous mine closures occurred, such as Cawse and
Black Swan within Australia, as a direct result of the fall in nickel prices. In 2009, Nickel West
announced that production at the Ravensthorpe mine would be suspended indefinitely and
the site would be placed on care and maintenance. Similarly, Norlisk suspended operations at
its four mines in 2009 due to very low nickel prices. In 2011, Norlisk restarted production at the
Maggie Hays mine near Lake Johnson in Western Australia.

Nickel, back to stay?—Post 2009

The price trough for nickel continued through most of 2009, with prices averaging around $16
000 a tonne for the year, in 2013 US dollars (see Figure 5). The price falls led to the total value
of Australia’s nickel exports falling by 6.5 per cent in 2009 compared with 2008 (see Figure 7),
despite increased export volumes. At the start of 2010, global stocks of nickel were at a 10-year
high of 234 000 tonnes, or around 10 weeks of consumption.

Since 2009 the nickel market has experienced a steady increase in prices and world refined
nickel consumption grew 19 per cent and 8 per cent in 2010 and 2011, respectively. The effects
of the euro zone crisis in 2012 reversed the steady increases in prices since late 2009. In 2012,
refined nickel consumption increased by 3 per cent, although the average price was 26 per
cent lower than in 2011 at $17,200 (2013 dollars). Both global and Australian nickel production
increased in 2012, with nickel sulphide ores accounting for around 40 per cent of known nickel
resources worldwide, with laterite ores accounting for the remaining 60 per cent (USGS, 2013).
Projected growth in emerging economies should support higher world consumption of nickel.

However, fluctuating demand and price volatility are likely to continue characterising the nickel
market in the future.


Dalvi, A. D., Bacon, W. G., & Osborne, R. C. (2004). The Past and Future of Nickel Laterites. PDAC
2004 International Convention (p. 27). Toronto, Ontario, Canada: Prospectors and Developers
Association of Canada.

Hoatson, D. M., Jaireth, S., & Jaques, A. L. (2006). Nickel sulfide deposits in Australia:
characteristics, resources, and potential. Ore Geology Reviews, 29, 177-241.

Mudd, G. M. (2007). An analysis of historic production trends in Australian base metal mining.
Ore Geology Reviews, 32, 227-261.

Mudd, G. M. (2010). Global trends and environmental issues in nickel mining: Sulfides versus
laterites. Ore Geology Reviews, 38, 9-26.

U.S. Geological Survey. (2013). Mineral Commodity Summaries, January 2013. U.S. Geological Survey

* The views expressed in this review are those of the author alone and are not necessarily those of the Bureau of
Resources and Energy Economics nor the Department of Resources, Energy and Tourism.

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