Nickel exploration is expected to drop further in the year ahead and if prices keep falling then "more mines may close," according to WA Mines Minister Norman Moore.
In a speech in Perth Moore said the nickel industry was struggling through tough times and the market price for the mineral had dropped significantly.
"The current price has reached levels not seen since mid-2009 in the midst of the global financial crisis," he said.
"This is a cause of concern and if the trend continues more mines may close."
Moore said the price falls had already caused "much pain" to nickel producers, with companies making significant layoffs over the last 12 months.
Last month Xstrata closed the Cosmos mine and sacked 150 workers due to the declining market, and last year the company also closed the Prospero mine for the same reason.
BHP has also laid off around 155 workers at its Nickel West operations.
Moore said the nickel industry was expected to worsen in the short term but was also showing signs of a recovery in the long term.
"It is interesting to observe that most, if not all key producers, seem to be in alignment in their thinking that there will be a resumption of stronger prices over the coming year," he said.
Image: Xstrata Nickel