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BHP Group has announced plans to cease its nickel operations in Western Australia, beginning October, citing significant economic challenges.
BHP Group has announced plans to suspend its nickel operations in Western Australia starting in October. The company cites severe economic challenges driven by global oversupply and declining nickel prices.
The suspension will affect key operations, including the Kwinana nickel refinery, Kalgoorlie nickel smelter, and Mt Keith and Leinster mines. Additionally, the development of the West Musgrave project will be halted as part of a care and maintenance program.
BHP anticipates reporting a significant underlying EBITDA loss of approximately US$300 million for the fiscal year ending June 30, 2024, due to the adverse market conditions. The decision affects approximately 3,000 employees, with 1,600 frontline staff offered alternative roles within the company.
Despite the suspension, BHP plans to invest approximately $300 million annually after a transition period to support a potential restart of its nickel business. The company remains cautiously optimistic about nickel demand towards the end of the decade, expecting increased investment to meet future demand beyond current Indonesian production.
The global nickel market has been under pressure, exacerbated by Indonesia’s robust supply growth and shifts in battery technology, which are reducing nickel demand in certain applications. BHP emphasizes the undervaluation of nickel produced with low greenhouse gas emissions, anticipating future market recognition of its environmental benefits.
The Australian government has been pushing for developing a domestic processing industry to enhance mineral resource value, which is crucial for the global transition from fossil fuels. However, industry players like BHP and IGO face challenges such as low commodity prices and high operational costs.
BHP has adjusted its financial outlook, including a $300 million increase in non-cash impairment charges against the nickel business’s carrying value. Redundancy payments and associated costs will be recognized in the first half of the fiscal year.
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