A business analyst has warned low nickel prices were putting pressure on miners, predicting mines may face the prospect of closure.
Nickel miners are facing increasing pressure from the price, which has dropped from over US $8 per pound in February to just above $6.
Subdued demand from alloy-makers is said to be behind the falling price amid signs of weakness in the sectors of China’s economy that are heavy users of the metal. Manufacturing in China has declined, with one report showing it has slowed for the past two months.
Meanwhile, production from nickel mines is set to outstrip global demand for the second year in a row according to the International Nickel Study Group. They predict output would total 1.86 million tons this year, compared with demand of 1.77 million tons, representing a 5.7% increase in output.
“Prices are going to bump along the bottom of this trough until the end of the year," said Mark Pervan, head of commodity research for Australia & New Zealand Banking Group, The Wall Street Journal reported.
"I don't see a catalyst for a pickup in demand out of China over the next six months."
Business commentator Tim Treadgold said the decline was set to create tough times for nickel producers.
"It's extremely difficult for any nickel mine or processing plant to survive when the nickel price gets down to six dollars or below, which is where it's plunged to in the last few weeks," he said.
BHP today told Australian Mining increased economic pressures and falling commodity prices will result in roles being cut.
“Continued global economic uncertainty, local industry cost pressures and depressed commodity prices continue to place pressure on our Nickel business,” a BHP spokesperson told Australian Mining.
While last year Xstrata closed the Cosmos mine and sacked 150 workers due to the declining market.
Treadgold said with nickel prices so low the viability of operations like First Quantum Minerals' Ravensthorpe mine was being questioned, ABC reported.
"They were for a while below the cost of production," he said.
"Whether they were making a profit is a different question, they may have just been paying their way but $6 is an extremely damaging price for Ravensthorpe."
However other analysts are optimistic the price has fallen too far and will soon rebound.
"The economic expectations implied by [current nickel] prices seem too bearish," Switzerland based fund managers wrote in a June note to clients.