BHP Group (ASX: BHP), the world’s largest miner, has decided to halt operations at its nickel mines in Western Australia. This decision, scheduled to commence in October, is a strategic response to the steep decline in nickel prices coupled with a global surplus of the commodity. This suspension is set to impact BHP’s Nickel West operations as well as the West Musgrave project, with a provisional restart date not expected before February 2027.
In an effort to mitigate the impacts on its workforce, BHP has outlined plans to extend redeployment opportunities to some of the 2,500 employees affected by the suspension. For those for whom redeployment is not possible, redundancy packages will be offered. Additionally, BHP is devoting A$20 million ($13.6 million) to establish a community support fund. The purpose of this fund is to aid the local communities that will inevitably experience economic and social repercussions due to the halt in operations.
The operational pause comes at a financial cost to BHP, as the company has announced an increase in its non-cash impairment by $300 million. As a result, the total impairment charges against its nickel business have now ascended to a significant $3.5 billion.
The Australian government, represented by Resources Minister Madeleine King, has voiced disappointment at BHP’s announcement. Minister King highlighted ongoing government efforts that aim to bolster Australian nickel production, which are now set against the backdrop of BHP’s suspension.
Market dynamics are at the heart of BHP’s decision. Nickel prices experienced a 40% drop last year and continue on a downward trajectory. The oversupply, in large part driven by increased production in Indonesia, has led to a dire market situation where half of the world’s nickel mines currently operate at a loss given the prevailing price levels.
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BHP’s struggles are not unique within the industry. Other major players, such as Anglo American and Glencore, are also reassessing their nickel operations. Anglo American is contemplating either the divestment or closure of its nickel division, whereas Glencore has been in the process of suspending and divesting some of its operations in New Caledonia.
The implications of these global mining giants stepping back from nickel production are considerable. Australian producers, including BHP, have long been significant contributors to the world’s refined nickel supplies, influencing prices on the London Metal Exchange. With these changes, industry watchers and stakeholders might expect shifts in both the availability and cost of this essential industrial metal in the years to come.
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