S&P/ASX 200 Index (ASX: XJO) mining stocks are underperforming the benchmark on Monday.
This comes amid news that Andrew "Twiggy" Forrest is temporarily shuttering the West Australian nickel mines at his privately owned company Wyloo, pressuring other mining companies with nickel operations.
In early afternoon trade today the ASX 200 is up 0.7%.
As for the big three ASX 200 mining stocks:
- Fortescue Metals Group Ltd (ASX: FMG) shares are down 0.1%
- BHP Group Ltd (ASX: BHP) shares are up 0.2%
- Rio Tinto Ltd (ASX: RIO) shares are down 0.3%
Here's what's happening.
Image source: Getty Images
Headwinds for ASX 200 mining stocks
As The Australian Financial Review reports, Wyloo, which Forrest acquired for $760 million in mid-2023, will enter care and maintenance at the end of May.
That news looks to be pressuring ASX 200 mining stocks amid ongoing weakness in the nickel price.
As we reported over the weekend, nickel prices have fallen some 50% over the past 12 months as supplies from both Indonesia and Russia have ramped up. However, the nickel produced by both of those nations, while selling for a cheaper price, also comes with a much larger environmental footprint.
And that's something that Forrest wants to change, seeking a global distinction between so-called clean nickel and the "dirty nickel" that comes from Indonesia. A distinction that could, if adopted, benefit ASX 200 mining stocks that produce the metal under higher ESG standards.
Commenting on the nickel markets last week, Wyloo Metals CEO Luca Giacovazzi said:
The industry needs a more appropriate and transparent pricing mechanism, that distinguishes between clean and dirty nickel, so consumers can be confident their EV really is a better choice for the environment.
Over the weekend Giacovazzi upped his criticism of "pollutive nickel".
"The LME [London Metals Exchange] is awash with pollutive nickel, which is squeezing out clean nickel from Australian producers," he said (quoted by the AFR).
"We need to see structural change in nickel pricing that distinguishes between nickel products as well as their ESG credentials," he added.
However, this is likely not an end to nickel mining operations at Wyloo, but rather a pause.
According to Giacovazzi:
The decision to temporarily pause our operations in the current nickel market will allow us to develop and assess these options as we move towards our long-term strategy to mine and process nickel from our own facilities in Kambalda and Kwinana.
It's not just Wyloo
While revenue from nickel is only a fraction of what iron ore brings in for ASX 200 mining stocks like BHP, Rio Tinto and Fortescue, the impact of cratering prices shouldn't be discounted.
At BHP's quarterly production update, released last week, the company noted, "At Nickel West, we are evaluating options to mitigate the impacts of the sharp fall in nickel prices."
The ASX 200 mining stock's quarterly nickel production was up 4% to 40,000 tonnes. But the average realised price of US$18,602 per tonne it received for the metal was down 24%.
