Too much nickel being produced, analysts warn – by Staff (Sudbury Star/Reuters – December 15, 2015)

As much as 70 per cent of global nickel output is unprofitable, the chief executive officer Glencore says, amid calls to slash production.

Ivan Glasenberg said that in 2013, the biggest nickel producers “really screwed up” by expanding too fast. The Baar, Switzerland-based company has already cut output in copper, zinc and coal.

In Sudbury, Glencore operates the Nickel Rim and Fraser mines, a mill and a smelter and employs about 1,200 people.

“People are bleeding cash, and when I say bleeding, it’s big cash,” Bloomberg News reported Glasenberg as saying, adding that as much as 70 per cent of global nickel output is unprofitable.

“We don’t understand why people don’t react in the same manner as we do. Big mining companies, other mining companies keep operations open, praying for better prices.”

Nickel has plunged 44 per cent this year, the worst performing main contract on the London Metal Exchange. Prices touched the lowest since June 2003 last month. On Monday, the price hovered below US$4 a pound.

The nickel market “seems to be very, very depressed relative to the cost curve,” Evy Hambro, manager of BlackRock’s $3.1 billion World Mining Fund, said on a conference call last week held by Glencore Plc.

BlackRock is Glencore’s fourth-biggest shareholder, Bloomberg said.

“How much longer do you think we’re going to see some of this production remain around before it’s forced to be taken out of the market?” Bloomberg reported Hambro as saying.

Bloomberg said Hambro’s question underlines investors’ growing frustration with miners’ reluctance to close unprofitable operations.

While Societe Generale SA earlier this month forecast the nickel market to be in deficit in both 2016 and 2017, years of excess production has expanded stockpiles, the news agency said. Inventories reached a record of about 900,000 tons, equal to almost six months of global demand, Macquarie Group Ltd. estimated last month.

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