Jinchuan May Have to Compete with BHP to Secure Nickel

Jinchuan Group Co., China’s largest refined nickel producer, may have to compete with BHP Billiton Ltd. for supply from Western Area Ltd.’s operations, the Australian producer said.

Jinchuan’s supply contract with Western Areas runs out at the end of the year, while BHP closed its Perseverance nickel mine in Western Australia in October and needs to source new supply to feed its Nickel West smelter, Western Area’s Managing Director Dan Lougher said in an interview by phone.

“We can give them more if they pay the right dollar,” Lougher said May 9. “Jinchuan is always keen to talk about life-of-mine contracts. The competitive tension that you can get around the smelters is quite important for us.”

Nickel, used to make stainless steel, rose to a two-year high this month on concern that Indonesia’s ore export ban is reducing global supplies. Nickel may rise to more than $30,000 a metric ton next year, according to Citigroup Inc. It traded at $20,760 at 3:35 p.m. Sydney time.

Calls to Jiang Yongsheng, head of international trading with Jinchuan Group weren’t answered. BHP spokeswoman Emily Perry wasn’t immediately available to comment.

Western Area’s mines, also located in Western Australia, are two of the highest grade operations in the world, according to its website. Its plant has production capacity of 25,000 tons of nickel concentrate annually. BHP, the world’s largest mining company, is contracted to buy 12,000 tons a year and Jinchuan purchases 13,000 tons annually under its current contract.

BHP’s production from its Nickel West unit, which includes mines and a smelter, will decline 10 percent in the next financial year after the closure of the Perseverance mine because of a seismic event. It re-opened its Rocky’s Reward mine to mitigate the supply shortage.

The company wants to simplify its portfolio to focus on iron ore, copper, coal and petroleum. Glencore Xstrata Plc said in March it was studying a bid for BHP’s Australian nickel assets. Western Area’s Lougher said he isn’t looking at the operations.

“If there is a sales process we want to know what is going on because we are part of the business,” he said.

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