Stainless steel production is the main market for nickel, and accounts for two-thirds of its use. After falling to an all-time low in early 2016, nickel prices began a slow upturn that continued into 2017, although LME prices remained low, averaging 4.73 USD/lb. This situation results from vibrant global demand for stainless steel, which set a record in 2017 (5.7% production increase from 2016), driven by the recovery of China’s economy (+ 6.9% GDP growth in 2017) and its steel industry. Demand was still strong excluding stainless steel, particularly due to the booming battery market. However, inventories stayed very high and supply continued to grow, with the ramp-up of Indonesian Nickel Pig Iron (NPI) producers and the easing of Indonesia’s ban on nickel exports. The market therefore remains uncertain.
The Eramet group is #1 world producer of high-grade ferronickel. It operates its own mines, which are world class in terms of the quality and size of their resources.
Turnover (€ millions)
The Nickel division’s FY 2017 sales totalled €644m, up 8% versus 2016. Metal stocks at the LME and SHFE remained at high levels, at 411 kt at end-2017, nonetheless down by 55 kt on the year. As a result, LME nickel prices remained low in 2017 at USD 4.73/lb on average, however slightly higher than the 2016 level (USD 4.36/lb on average).
Current operating income (€ millions)
Current operating income was negative at -€125m in 2017, penalised by the ramp-up of Sandouville, with a loss of c. €40m, which offset the €32m improvement from SLN during the period.
Industrial capex (in € millions)
In 2017, Nickel division’s investment budget was higher than in 2015 and 2016, due to the major replacement or renovation projects. Strict criteria were used to appraise projects to be undertaken in order to ensure they met the priority needs of safety and environmental protection, improved productivity, ore were used to replace obsolete equipment.
Metallurgical Production (tons)
Nickel metallurgical production at SLN increased by 2.9% in 2017 versus 2016 and reached 56.8 kt.
Cost reduction and performance improvement plan at SLN
SLN successfully completed its performance plan, which aimed to cut its production costs by 25% over the 2016-2017 period. All personnel rallied round the challenge of reducing SLN’s cash cost from 6 USD in 2015 to 4.50 USD/lb by the end of 2017. The result was achieved through work on productivity at both mine and plant, a focus on machine maintenance and reliability, the launch of digital transformation, etc.
The 2017 target was achieved, but SLN is aiming farther to resume sustainable high performance. This ambition, carried by the new 2020 performance plan, starts in 2018 with the aim of bringing SLN’s cash cost down to 4 USD/lb. From productivity efforts to improving the plant’s energy costs, the new plan is based on a sound ambition: overhauling SLN’s organization and management model to move closer to the best in terms of competitiveness and safeguard the long-term future of New Caledonia’s foremost mining player.
Sandouville: a difficult ramp-up
Since June 2017, Eramet's Sandouville, France plant has been supplied from a new European source of matte under a long-term agreement. Since the startup in midyear, the ramp-up has remained difficult, with lower operating rates. Rated production capacity is 15,000 tons per year of high-purity nickel for cutting-edge industries, particularly for the electronics and battery markets.
Weda Bay: new partnership in implementation process
Located in Indonesia’s Northern Moluccas archipelago, Weda Bay is one of the world’s biggest nickel deposits. Acquired by Eramet in 2006, it holds more than 9 million tons of nickel content. In February 2017, Eramet’s Board of Directors approved the terms of a framework agreement with the Chinese steelmaking group Tsingshan, the world #1 producer of stainless steel, to beneficiate this asset. The goal is to produce nickel pig iron (30,000 tons per year, among which 13,000 tons per year for Eramet) at competitive prices through a pyrometallurgical process. This would diversify and broaden the Group’s offering on the ferronickel market.
The implementation of this partnership was done in May 2018. Eramet now holds 43% and the Tsingshan group 57% of this venture.
Asset disposals program
On 9 December 2016, Eramet announced the signature of an agreement for the sale of Eurotungstene (specialised in developing, manufacturing and marketing metal and pre-alloyed powders) to Umicore. This disposal was effective in April 2017.