Strike forces closure of Inco nickel mine
Nickel prices vaulted up by 5 percent on Friday as Inco Ltd. said it was starting an “orderly shutdown” of its Voisey’s Bay nickel mine in Canada after workers walked out.
Some 120 employees of a total workforce of 420 walked out at midnight at Voisey’s Bay, one of the world’s largest nickel mines, after talks with management broke down, a union representative said.
“They are on strike,” said Wayne Fraser, an official at the United Steelworkers union, which represents about 120 workers at the mine and mill.
Three-month nickel contracts on the London Metal Exchange (LME) jumped 5.3 percent to $25,000 a tonne from $23,750 at Thursday’s close. Earlier in July it hit a record $26,850.
Inco said it was shutting down the mine in Labrador.
“We are obviously disappointed with this outcome. We are now in the process of beginning an orderly shutdown of our production facilities,” said Bob Carter, an Inco spokesman at the operation.
Fraser told Reuters on Thursday that monetary issues were the stumbling blocks in the negotiations for a first labor contract at the operation.
The shutdown comes as stocks of nickel in LME-monitored warehouses fell 402 tonnes to 4,272, of which just 1,404 tonnes are available to the market. Global nickel consumption runs at around 3,500 tonnes per day.
“This won’t affect availability of metal at all, unless the strike is very drawn out,” a physical nickel dealer said.
“They have a minimum of two months supply of concentrate stockpiled at the smelter and also in Labrador,” he added.
BaseMetals.com analyst William Adams said: “Potentially this is very bullish, but I don’t think Inco will let it last.”
“We will need to see how protracted this become, but with the low level of visible stocks things could tighten up considerably and we may see new highs.”
Dealers said the market had not reacted as sharply as some had expected.
“Fundamentals are supportive but there are rumours that up to 15,000 tonnes of nickel may be heading for Europe,” Bache Financial minerals strategist Angus MacMillan told Reuters.
Many investors have bet that material will flood in soon and the tightness will ease. That was evident in the premium for cash metal, which has halved to $1,300 a tonne above the three month price, from $2,700/2,800 at the start of the week.
Voisey’s Bay started producing in September 2005 and is expected to produce 120 million pounds (54,000 tonnes) of nickel in concentrate in 2006.
Inco walked away on Friday from a bid for fellow Canadian miner Falconbridge leaving the way clear for Swiss-based Xstrata’s hostile offer.
Xstrata was up around 5 percent on Thursday and traded nearly 8 percent higher on Friday after the announcement and was the biggest gainer on London’s FTSE 100 share index.
Copyright © 2006 Reuters Limited. All rights reserved.
