Eramet announces strong growth in its volumes and a sharp rise in its results in the first half, in pursuit of its global development plans. The only downside is that while the volume of nickel ore exports from New Caledonia is rising sharply, metallurgical production at the Doniambo plant is still struggling.
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Published on July 28, 2022 at 05:34,
updated on July 28, 2022 at 06:54
The title of the mining and metallurgical company involved in energy transition is recovering and outperformed the Paris stock market on Tuesday July 26, taking advantage of a favorable context linked to interest in raw materials. On Wednesday July 27, in the evening in Paris, the publication by Eramet of its half-year results shows a sharp rise in the 1st half, except for the metallurgical production of nickel at the Doniambo plant.
We still have to wait. The securing of its electricity supply, crucial to enable SLN to produce more nickel, should be implemented in September, following the expected arrival at the end of August of the floating power plant of the Turkish specialist Karpowership. SLN is counting on a significant improvement in its production.
In the meantime, the rebound in nickel prices until March still allowed the world cradle of the nickel industry to stay afloat, even if the prices of ferronickel (class 2 alloy of iron and nickel, produced by SLN in New Caledonia) have now fallen to a level well below the price of pure nickel (Class 1) which serves as a benchmark for the London Metal Exchange (LME).
And the nickel weather is increasingly influencing the constraints of mining and industrial activity in the Territory.
Eramet’s press release, published at 3:31 a.m. in New Caledonia, indicates in its 2022 outlook that the group’s global production targets are “confirmed, except at SLN“. Nothing catastrophic, but the situation remains fragile.
“In New Caledonia (…) the objectives are revised downwards to more than 40,000 tonnes of nickel for the production of ferronickel at the Doniambo plant in 2022”, – the Doniambo plant has a capacity of 50,000 tonnes -, “and more than 3.5 million tons for the export of nickel ore”, continues Eramet.
“The Eramet subsidiary was unable to seize the exceptional opportunity of nickel prices. It slightly increased its production but it is not at the desired production targets for the first half of 2022”, indicates to Outre-mer 1ere a source close to the Eramet group, on condition of anonymity.
The lack of electricity and bad weather are the two main brakes on the rise in metallurgical production.
Fortunately, the agreement concluded with the Caledonian government has enabled “+ 31% volume of nickel ore exports from New Caledonia”underlines the press release from Eramet, “despite severe weather and a 13% increase in the number of rainy days.”
For these reasons, total ore exports which were expected to be 4 million tonnes in 2022 will not be reached but are expected to reach over 3.5 million tonnes.
The “cash cost” (effective cost) of SLN averaged $8.06/lb ($17,700/tonne) in the first half of 2022, for a production of 20,400 tons of nickel in mid-July, reflecting the increased cost inputs, mainly energy, coal (whose price has more than tripled) and freight (increase of regarding 43% for nickel ore.
The production cost of the Doniambo plant, around 17,700 dollars per tonne in the first half, has therefore deteriorated, it is slightly higher than the average price of ferronickel expected on the world market in the coming months (17,000 dollars).
The situation therefore remains fragile. SLN has had to revise its objectives downwards.
Read the Eramet group’s financial press release for the first half of 2022 by clicking on this link.
