Industry Trend Analysis - Hurricane Season To Hit Nickel, Cobalt Output - OCT 2017

BMI View: We have revised down our Cuban nickel and cobalt production forecasts for 2017 following operational disruptions due to hurricanes. Cuba's nickel sector will experience a slow recovery thereafter, given the lack of new projects planned and a weak long term outlook for nickel prices.

On September 8, the Cuban government announced the shutdown of the state-run Ernesto Che Guevara nickel-cobalt plant and the winding down of operations at the Moa nickel-cobalt mine and plant in preparation for Hurricane Irma. The Moa operation, a joint-venture between the Cuban government and Canadian miner Sherritt International, produced 15.2kt of nickel and 1.7kt of cobalt in H117, representing a 9.6% and 10.7% y-o-y decline, respectively, due to impacts from Hurricane Matthew at the end of 2016 and a longer planned annual refinery shutdown.

As such, we lowered our 2017 production forecast for Cuba's nickel and cobalt, to a 20% and 30% contraction, respectively, from previous expectations for modest growth. While the damage from the hurricane remains unclear and thus presents a downside risk to longer-term production forecasts, we expect the state-run General Nickel Company SA of Cuba and Sherritt to prioritise restarting operations given higher nickel prices in 2017 compared to 2016, and rising cobalt prices.

Difficult Recovery For Nickel Output
Cuba - Nickel Mine Production ('000 tonnes) & Growth (% y-o-y)
f = BMI forecast. Source: USGS, BMI

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