Major nickel producers are in cost-cutting mood

The nickel industry has reacted to lower prices by cutting costs. A study by research firm Brook Hunt & Associates of England says producers have chosen not to reduce production by a meaningful amount but to cut costs ever more vigorously.

The large producers — Inco, Falconbridge and Western Mining — exploiting sulphide deposits are all engaged in activities which will improve productivities, although any of the real benefits will not be felt until next year, says Brook Hunt in its Nickel Industry Cost Study (1982-1995). At Inco, labor continues to be shed and costs will fall further in 1994 when, in addition, the company will begin to reap the full advantages of its new flash furnace. The unit is part of Inco’s sulphur abatement program and becomes operational later this year. Falconbridge, too, has cut its employment roll and all non-essential development expenditure. Western Mining will see its costs fall further when the current expansion is completed and the company is able to implement new working practices at Kambalda.

These measures, taken together, should see cash costs for sulphide producers fall by a further US30-40 cents per lb. by 1995.

Ferro-nickel producers exploiting laterite deposits have not had the same opportunities to reduce costs as the sulphide operators. Although average cash costs fell in 1992, they were down by only 4%, compared with almost 9% for the sulphide miners. Also, laterite operators’ direct cash costs remained 20% above those of the sulphide operators.

Nevertheless, laterite operations had lower average costs on a fully allocated basis than the sulphide producers, reflecting considerably lower depreciation, indirect and interest expenses.

For more information about the study, write Brook Hunt at Woburn House, 45 High St., Addlestone, Surrey, England KT15 1TU.