AFTER a competitive tender process, China’s largest nickel producer Jinchuan Group has won a 12-month contract to purchase up to 15,000t of nickel from Western Areas. Perth-based Western Areas received a large number of bids from global operating and investing companies before selecting Jinchuan.
“We are pleased to continue the strong relationship we have forged with [Jinchuan],” Western Areas managing director Julian Hanna said.
“We have been selling nickel concentrate to Jinchuan since July 2010,” he added. The new contract begins in March 2012 and contains improved terms for Western Areas.
In an early December ASX release, Western Areas said the short-term nature of the contract gave the company flexibility to take advantage of possible future price increases. “We consider that in the current volatile market, the decision for a short-term contract will be beneficial for the company,” Mr Hanna said.
Nickel has been the second worst performing metal on the London Metal Exchange during the last seven months of 2011, with the cash quote nickel price dropping from about $30,000 per tonne early in 2011 to $17,000/t by the end of the year. Experts have attributed the drop to a substantial worldwide nickel surplus, and the use of nickel pig-iron by Chinese stainless steel producers. Reuters reported that the global nickel market would move further into over-supply from 2012 to 2013, pushing prices for the metal lower in the medium-term, but Mr Hanna disagreed. “We are seeing independent analysis indicating the nickel concentrate market is heading into a sustained period of short supply,” he said.
“Western Areas’ ability to be a reliable supplier of high quality nickel concentrate provides a clear strategic advantage over our peers.”
During the 2010/2011 financial year, Western Areas sold 25,055t of nickel concentrate into its BHP Billiton and Jinchuan offtake agreements, with the company expecting this level of sales to continue based on current production estimates.
By Reuben Adams