World May Depend on Australia, Papua New Guinea for Nickel Supply

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Researched by Industrial Info Resources Australia (Perth, Australia)--Indonesia's ban on nickel ore exports earlier this year helped to drive the price of the steelmaking raw material up at least 33%. With traders panicking at the prospect of dwindling global supplies, and the possibility of further sanctions placed upon Russia for its involvement in Ukraine (one of the affected companies was Norilsk Nickel Limited (MCX:GMKN) (Moscow), a global nickel heavyweight), the Oceania region could become the world's next major nickel supplier. More than 24% of known global reserves are located in the region.

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Australia is the world's fourth-largest producer of nickel, behind Russia, Indonesia and the Philippines. Western Australia, most notably Kalgoorlie, has the largest share of known nickel reserves in the country. Less significant resources can be found in New South Wales and Tasmania.

The country looks to be a strong candidate to fill the huge void left by Indonesia's commodity export ban, with a number of large-scale projects planned. Australia's largest nickel project, the grassroot Wingellina processing plant, will cost Metals X Limited (ASX:MLX) (Perth, Australia) more than AU$2.3 billion (US$2.1 billion) and is expected to produce 40,000 tonnes of nickel per year for export.

It is anticipated that the state of Western Australia will provide the bulk of new export capacity, so that the country can capitalize on the continued Indonesian export ban, with the addition of several new grassroot nickel mines that are expected to be developed in the area. The $891 million Yerilla Mine will provide more than 3 million tonnes of nickel concentrate to the export market, by far the state's largest contribution to Australia's nickel export capacity.

Australia's neighbor across the Arafura Sea, Papua New Guinea, also seems likely to contribute to the nickel supply, with the addition of two grassroot processing plants. The $655 million Wowo Gap mine, located 35 kilometers from the village of Sofia, will produce 13,000 tonnes per year of nickel, while the Mambare project is expected to process more than 3 million tonnes of nickel concentrate for export to international markets.

Although nickel is expected to maintain its current pricing throughout the year, some analysts suggest that there could be a decline in prices when new production is brought online, as several global producers could restart units or start-up new plants to meet the change in nickel demand. The outlook for nickel prices may well seem positive for the short term, but with more than $6 billion invested in over 28 nickel projects throughout the region, prices may stabilize as Oceania's nickel industry ramps up.

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