price for 99.8% pure metal on the London Metal Exchange
(LME) reached a 2-year low of $6,581 per metric ton in
December 1996, climbed briefly to $7,896 during the first quarter
of 1997, and then entered a period of deterioration lasting more
than 15 months. By January 1998, the monthly cash price had
dropped to a 4-year low of $5,492 per ton and was still slipping.
Several analysts attributed the extended price decline to concerns
about anticipated new mine production capacity (Mining Journal,
1998). More than 160,000 tons of capacity (on a contained nickel
basis) are scheduled to come on-stream between mid-1998 and
2002. Most of these new mines would be in Australia (van Os,
1998). Some of the Australian mines would refine the nickel on-
site, while others would ship concentrates or matte to Outokumpu
Oyjs recently expanded refinery in Finland. Since 1992, global
nickel supplies have more than kept pace with growing demand
for the metal in the Western World and a short-term oversupply
situation beginning in 2001 cannot be ruled out. Exports of
primary nickel from Russia have remained firm, while
consumption inside the country has plummeted. The recent
financial crisis in Asia has created problems for several major
stainless steel producers and psychologically discouraged
investment in nickel by commodity funds and banking houses
(Mining Journal, 1998).
The deterioration of prices coincided with the launching of
several new nickel mines in Australia, the modernization of
beneficiation facilities in Cuba, and extensive expansions of
downstream production operations in Indonesia, Norway, and the
United Kingdom. New mining projects were also at various
stages of development in Brazil, New Caledonia, Ontario,
Quebec, and Venezuela.
Development of the world class Voiseys Bay nickel-copper-
cobalt deposit in Labrador was still at a very early stage and was
proceeding slower than anticipated because of the complex
environmental review and approval process. Weak nickel and
copper prices destroyed much of the incentive for Inco Limited
and Canadian authorities to accelerate their negotiations and
reach an early agreement. Inco gained control of the Voiseys
Bay deposit in August 1996 by acquiring its owner, Diamond
Fields Resources Inc. Inco paid the shareholders of Diamond
Fields $3.1 billion in cash and stock to surrender their holdings.
The Voiseys Bay complex is the first major mining and milling
project to be subjected to a full review under Canadas new
Environmental Assessment Act. Inco submitted its environmental
impact statement to Canadian federal and provincial authorities
in December 1997 and was still negotiating impact and benefit
agreements with the local Labrador Innu and Innuit communities
at yearend. The settlement was linked to the outcome of
independent land claim negotiations underway between the
Federal and Provincial Governments and the two First Peoples
Nations. By yearend 1997, exploration drilling at Voiseys Bay
had delineated 116 million tons of sulfide ore resources. Five ore
bodies have been identified to date, with average grades ranging
from 1.36% to 2.83% nickel (Ni), 0.65% to 1.68% copper (Cu),
and 0.09% to 0.12% cobalt (Co) (McCutcheon, 1998). The
Voiseys Bay project, the modernization of operations at Sudbury,
Ontario, and the new Raglan Mine in northern Quebec should
solidify Canadas position as a leading supplier of nickel far into
the 21st century.
Russia continued to be the worlds largest producer of nickel,
with the bulk of its output coming from mines operated by RAO
Norilsk Nickel in the Arctic. In 1997, Norilsk Nickel accounted
for 94% of total Russian production. The newly privatized
company continued to restructure all of its mining and processing
operations and produced 23% more nickel than in 1996. Norilsk
Nickel has a large nickel-copper smelting complex on the Taimyr
Peninsula in Siberia and two more on the Kola Peninsula
bordering Finland. Outokumpu Oyj of Finland was helping
Norilsk Nickel evaluate, upgrade, and modernize all three
complexes. Outokumpu Oyj pioneered flash smelting and is 1 of
the top 10 nickel producers in the world. Modernization of the
three complexesat Norilsk, Monchegorsk, and Pechengahas
been hampered by low nickel prices and the enormous amounts of
capital required to make the operations environmentally
acceptable and economically competitive. Officials of Norilsk
Nickel and the Russian Federation have been negotiating since
1993 with potential financial backers from Scandinavia for a
significant portion of the $1 billion needed to modernize the
Pechenga smelter. New pollution control equipment was needed
to sharply reduce sulfur dioxide (SO
2
) emissions from Pechenga
and help improve air quality across much of Lappland (Blatov,
I.A., and others, 1996).
In September, QNI Limited of Australia agreed to purchase the
nickel division of Billiton Plc (formerly owned by Gencor Limited
of South Africa). QNI funded the purchase by issuing a large
block of new shares to Billiton Plc, which gave Billiton a
controlling interest of 52.5% in the enlarged QNI. The merger of
QNI and Billiton Nickel created the fifth largest nickel producer
in the world, with a market capitalization of about A$2 billion
(QNI Limited and Billiton Plc, 1997).
Several key mining projects have been proposed for Cuba.
Exploration was underway in Camaguey and Holgu�n Provinces.
Metals Enterprise, a 50-50 venture of Sherritt International
Corporation and the Government of Cuba, continued to
modernize the laterite mining and beneficiation complex at Moa
in spite of the U.S. embargo. The bulk of the sulfide precipitate
was being shipped to the joint ventures refining complex at Fort 53.2
NICKEL1997
Saskatchewan, Alberta. World War II-vintage operations at
Nicaro also were being rehabilitated.
Stainless steel currently accounts for about 65% of primary
nickel demand in the entire world (Upton, 1998). Another 5% is
consumed in the production of alloy steels. Over the last 20 years,
stainless steel production in the Western World has been growing
at an average rate of 4.5%, down somewhat from the long-term
trend of 6%.
In 1997, apparent U.S. demand for primary nickel was 154,000
tons, 5% more than that of 1996. About 40% of the nickel was
used to make austenitic stainless steel. U.S. demand for stainless
steel was up 6%, with about 25% of the demand being met by
imports. U.S. stainless production increased 12% to a record high
2.16 million tons (American Iron and Steel Institute, 1998a). On
a per capita basis, the United States consumes significantly less
stainless steel than Germany, Italy, Japan, the Republic of Korea,
and Taiwan (Inco Limited, 1997c). While the European Union
(EU) reported an increase of 12% in stainless steel production, it
had an output of 6.89 million tonsmore than three times that of
the United States. Japanese stainless steel production was up only
slightly (International Nickel Study Group, 1998b). Japans
output was 3.26 million tons1.5 times that of the United States.
For the first time, the combined stainless steel production of the
Republic of Korea and Taiwan equaled that of the United States.
Since 1995, Koreas Pohang Iron and Steel Company (POSCO)
and Taiwans Yeih United Steel Co. Ltd. have added significant
stainless steel production capacity. Stainless steel production
remained depressed in Russia because of that countrys continuing
economic restructuring.
Demand for primary nickel by battery manufacturers continued
to grow, although the tonnages involved were an order of
magnitude smaller than those for stainless steel. Rechargeable
nickel-cadmium and nickel-metal hydride batteries were in strong
competition with one another for hand-held power tools, cellular
telephones, laptop computers, and camcorders. The bulk of the
nickel-based batteries imported into the United States were made
in Japan, Mexico, China, Taiwan, or Malaysia (in descending
order of market share). Industry analysts estimate that, in 1997,
Japan manufactured 77% of the rechargeable batteries consumed
worldwide. About 94% of the nickel-metal hydride batteries was
produced by Japanese companies or Japanese-owned companies
(Koyama, 1998).
Electric vehicles (EVs) were being commercially manufactured
in the EU, Japan, and the United States. However, production
and sales were limited. The servicing infrastructure and the
network of charging stations needed to support a large number of
EVs were still in a state of infancy. In the United States, few
charging stations were available to the public outside of Arizona,
California, and Washington State. The first vehicles mass
produced by PSA Peugeot-Citro�n and Renault of France were
powered by nickel-cadmium batteries. The batteries were being
made by SAFT S.A. at its new plant in Bordeaux. The two
French automotive companies were in the process of switching to
SAFTs new nickel-metal hydride batteries and were also testing
lithium-ion battery prototypes. Honda Motor Co. Ltd. of Japan
was using nickel-metal hydride batteries in its new EV Plus, a
two-door sedan. In May, Honda began leasing the EV Plus to
California fleet owners. The first models of the EV-1 being sold
by General Motors Corp. in Arizona and Southern California had
lead-acid batteries, limiting its range. The Detroit auto
manufacturer was planning to introduce a nickel-metal hydride-
powered version in the fall of 1998.
In December 1997, Toyota Motor Corporation began selling its
new hybrid-powered