Glencore announced on Monday its decision to shutter and divest its interest in the struggling Koniambo Nickel SAS (KNS) venture in New Caledonia, amid a significant downturn in nickel prices that continues to impact the industry.
The Swiss mining and commodity trading company stated its intention to seek a new partner for the nickel mine and processing plant in the French territory, emphasizing readiness to resume operations swiftly should a new investor emerge.
Additionally, Glencore disclosed plans to offload its 49% ownership in KNS, as confirmed by KNS in a separate statement.
The plummeting prices of nickel, a vital component in stainless steel and electric vehicle batteries, have nearly halved over the past year, severely affecting producers across the board.
Wyloo Metals Pty Ltd., owned by mining tycoon Andrew Forrest, announced in January the closure of its Western Australian nickel mines, reflecting the broader challenges facing industry players like BHP and First Quantum Minerals, alongside numerous smaller miners either halting construction or entering administration.
Colin Hamilton, Managing Director for Commodities Research at BMO Capital Markets, highlighted the mounting pressures within the global nickel market, suggesting the need for further capacity adjustments following last year’s surplus.
Meanwhile, the French government, exercising jurisdiction over New Caledonia, has been deliberating a rescue package for the region’s nickel sector, including potential emergency financial aid and proposed reductions in energy costs.
Glencore justified its decision, citing over a decade of funding KNS without achieving profitability, notwithstanding proposed government assistance. The company underscored the ongoing challenges posed by high operational costs and the current weakened nickel market conditions.
Since 2012, KNS has reportedly contributed $5.6 billion to New Caledonia’s economy, encompassing construction and operational expenditures, along with significant investments in local goods, services, and salaries.
Last year, Glencore announced plans to discontinue financing KNS by the end of this month, originally intending to retain its stake in the operation. The company proposed transitioning the facility to nickel ore exports and mothballing operations, a move expected to impact approximately 1,300 local jobs and potentially further consolidate Asia’s dominance in the nickel supply chain.
Glencore has committed to retaining all KNS employees for six months to facilitate the transition process.