Glencore likely to cut back nickel production, says analysts

SEATTLE (Scrap Monster): According to analysts speculations, Glencore may cut back Nickel production. The company had earlier announced cuts to its copper and zinc production.

Gavin Wendt, analyst at Minelife commodities noted that cut in nickel output is likely to save millions of dollars for the company and lift the prices of the metal in the process. Production cut by Glencore will have immense impact on global nickel market and could lead to a rally in beaten-up nickel prices, he added.

According to UBS analyst Daniel Morgan, not many nickel miners have resorted to production cuts when compared with other commodities. The notable cut in production so far has come from Canadian Sherritt International Corp. which reduced its nickel production targets in July from earlier estimate of 80,000-86,000 tonnes to 78,000-82,000 tonnes. He added that nearly 50% of the world’s nickel production is at loss at today’s price. Moreover, LME warehouses hold excessive nickel inventory levels of 440,000 tonnes as on date.

Of late, Glencore’s Nickel division has been a clear underperformer. The revenues from the division have dropped by 25% during the first half of the current year. This is significantly higher when matched with the drop in revenues of 12% and 8% for copper and zinc respectively.

Glencore, in September, had announced its decision to cut 400,000 tonnes of copper supply by declaring 18-month moratorium on copper operations in the Democratic Republic of Congo and Zambia. Last week, the company had announced its decision to cut 4% of global zinc supply by eliminating 500,000 tonnes of production. After the moves in copper and zinc, Glencore may look at implementing production cuts in Nickel too, analysts noted.

Meantime, speculations of production cuts led to big rally in Nickel prices. The prices rebounded from near seven-year lows. The LME prices on Tuesday quoted at $10,460 a tonne on Tuesday.