Global Ferronickel upbeat on demand, cites lower costs

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MINER Global Ferronickel Holdings Inc. said it is benefiting from the plunging crude prices despite lower metal prices as demand for nickel in China remains promising even with its slowing economy.

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Dante Bravo, Global Ferronickel president, said the lower oil prices enabled the company to bring down its operating costs.

“Now we are able to bring down our costs by as much as 40 percent, particularly in high-grade and medium-grade [ore]. For low-grade, it is by 30 percent,” Bravo said.

“So even if nickel prices are low, we are still able to sell. When oil is at P45 per liter, we are challenged to sell. But right now, at P17-18 practically, the price of oil is down by as much as 60 percent. As you can imagine, that is the biggest single cost component in mining. It has such an impact in terms of bringing down the cost,” he added.

Last year, the miner was able to sell 5.4 million metric tons of nickel ore, incurring an average cost of $18 per ton, with direct cost standing at $13 per ton.

“This year, we target to reduce that to about $10 [per ton],” Bravo said.

Bravo, however, declined to disclose Global Ferronickel’s financial performance for last year pending the results of its audited financial statement.

Global Ferronickel expects to ship 5 million MT of nickel ore this year.

Bravo said that the extremely volatile nickel market remains promising despite the economic slowdown in China, which is the biggest consumer of nickel worldwide.

Ramon Peter Adviento, Global Ferronickel investor relations officer, said that nickel consumption in China is seen to be flat for the year but 2015 figures point to a higher stainless steel consumption in the country.

“The nice thing was that there was a shift to the higher-end stainless steel, which consumes more nickel. This grew by 3.5 percent last year. And the nice thing about this is that it consumes around 10 percent nickel, which gives us a net effect of higher nickel consumption,” Adviento said.

Adviento noted that the pessimism over the nickel market appears to be associated with the slowdown in the construction industry which, in turn, is likewise related to the consumption sector.

“It turns out that people do not realize that the consumption of stainless steel and nickel per se and its correlation to consumption is higher. A lot of appliances have stainless steel. You have a middle class of 370 million in China and it is growing. What do they really buy in the first place? So it turns out there is room for growth,” Adviento said.

He added that the encouraging prospects for consumption can be seen in the energy sector in China since even in this segment, nickel also finds opportunities.

“What does it have to do with stainless steel? It turns out that the solar panels, the whole frame and the support, are all made of stainless steel. And on the nuclear side, it turns out that the heaviest consumption of metal there is stainless steel—the one for the turbine. All the heating pipes are all stainless steel. Even the carbon containers are stainless steel,” he said.

“It shows that there are many components that use stainless steel,” he added.

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