Nickel Handbook

Commodites and Export Projections Division

Economic Analysisand ProjecUonsDepartment

.
-*^ February 1981

TABLE OF CONTENTS

Page No.

I. THE CHARACTERISTICOF THE PRODUCT .. 1

A. Nickel Propertiesand Nickel Alloys . .1................
B. IntermediateUses of Nicke' .. 2
C. Classes of Nickel Product .. 6
D. Nickel Ores and Resources .. 7

II. THE LOCATION OF THE INDUSTRY .. 1

A. Production
................................................. 1
B. Reserves .. 3
C. SecondarySources .. 6
D. Consumption .. 6
E. Trade .. 8

. III. THE STRUCTUREOF THE INDUSTRY

.................................. 1
A. Degree of Integration; Control............................. 1
B. Barriers to Trade.......................................... 4

IV. ECONOMIC PARAMETERS USED IN THE MARKET ANA YSIS OF THE

INDUSTRY....................................................... 1
A. Demand Elasticities........................................ 1
3. Supply Elasticities........................- 2
C. Price Determination Mechanisms ............................. 3

V. MARKET PRICES................ I
1....

VI. SPECIAL ISSUES .. 1...............

A. Substitutes................................................ 1
B. Processing................................................. 2
C. Nickel from Marine Sources................................. 3
D. Technical Coefficients..................................... 10
February 1981

Page No.

Tables

I-l Nickel - World Consumptionby Uses: Volume,

StLucture and Growth . ........................... I-3
11-1 Nickel - Mine Production .. II-2
II-2 Nickel - Smelter and Refined Production ...............
. . II-4
II-3 NickelReserves, 1979 .. 11-5
II-4 Nickel Consumption .. II-7
II-5 Summary of Nickel Exports .................. II-10
II-6 Nickel Exports, by Countries ................. II-11
II-7 Nickel Exports by Product .................. II-12
II-8 Nickel Imports,by Countries .. II-13
1..............
11-9 Nickel Imports,by Product .................. II-14
I11-1 Corporate Structureof the World Nickel Industry ... III-2
III-2 Tariff Structureon Nickel in the United States .. III-4
IV-1 ApproximateBreakdown of World Nickel Production
Capacity by Unit ProductionCost, 1976 . ...........
IV-4
V-1 Nickel - INCO's Prices .................... V-2
V-2 Other Nickel Market Prices .................. V-3
VI-1 EstimatedMetal ProductionPer Million Metric Tons
of High Grade Nodules...................................
VI-8
VI-2 Nickel - Technical Coefficients VI-10
.........................

0
- February 1981 I-1

I. THE CHARACTERISTIC OF THE PRODUCT

A. Nickel Propertiesand Nickel Alloys

1. Nickel shares some propertieswith iron: high melting pv nt,

strength,hardnessand magnetism. However, nickel is superiorto Lronin its
a ility to resist corrosionand oxidation and in its great strengthat eleva-
ted temperatures. Ft thermore,when alloyed with other metals, nickel
provides a variety attractivequalities preferableto those of other ma-
terials in a number J applications. Hence, about 85% of total nickel
consumptionis in the form of alloys, with most of the remainder going to
electroplating,for which nickel is a basic material.

2. Alloying nickel with iron (between36 and 46% nickel) produces the
"invar," a material wh±ch expands very little under sharp changes in tempera-
ture. It is in fact similar to platinum in its expansion characteristics,but
can be produced at much cheaper cost. The use of iron/nickelalloys in elec-
tric bulk making and in chronometersand accurate measuring tapes has been
growing. By rising the nickel content to 78.5%, a new nickel/ironalloy is
producedwhich is less susceptibleto magnetism; its use is expanding in
transatlanticcables. This alloy can increase the speed of transmission
Lvefold.1/

3. Nickel/chromiumalloys (80% nickel) can withstand great stress at

high temperatures. A number of these alloys, known as the "nimonic" series,
which were developedduring the Second World War, are essential for jet tur-
bine engines. Nickel/molybdenumalloys (70% nickel) are particularly
resistant to corrosionand are also strong. Both types of alloys are
increasinglybeing used in the chemical and petroleum industries.

1/ In addition,nickel cast iron has been in use since 1925. The amount of
nickel can be as low as 3%, yet the alloy still has exceptionalhardness
and resistenceto corrosion. It has been used increasinglyin the manu-
facture of crushersand ball mills for cement, gold ores and coal.
4. The nickel/copperalloys provide "monel," a natural alloy in that
it is two parts nickel and one part copper, the proportionfound in many ores
in Canada (such a mixed ore couli be smelted directly). Monel, when modified
with a slight addition of aluminum and titanium, has not only twice the
strengthof mild steel, but also heat-resistantand non-agnetic qualities.
It is, therefore, widely used in the parts of airplanes near the coupe.. and
also has a significant number of marire and mine-sweeping applications.
Cupro-nickelshave high electricalresistanceat a wide range of temperatures;
thus different combinationsof both metals are particularlyattractivefor
condenser tubes, pipelinescarrying sea water, coinage, telephoneexchanges,
etc.

B. IntermediateUses of Nickel

5. Nickel enters intermediateuses through a variety of nickel pro-

nickel is used in the making of stainless and
cesses. In the steel iiLdustry,
heat-resistantsteels, alloyed steels and iron and steel castings;this indus-
try accounts for more than 60% of total world market economies'consumption.
Nickel electroplatinguses about 14%. A number of nickel alloys (those not
related to the steel industry),along with nickel salts and oxides, account
for the remainder (Table I-1).

6. The rate of growth of nickel use in stainlessand heat-resistant

steels was faster than that for nickel consumptionoverall, thus raising the
share of stainless in total world nickel consumptionfrom 33% in 1960 to
about 44% in 1976. The main types of stainless are the disignated300-series
 .y .. Ut17 981 ...... I-I

Table I-1: xzcui. -vo

nc VOL ,
coWss OII3YLSES:
Table- 1 STCTCUZ AIIDOROUTH/'

- lam , SLte _r
Mm RRAG tos, _niclcontGrt) (Ii of toIirI 3
tat*T MM
V160 1970 19?4 1976 1960 1970 1974 1976 1960w 1971. 1960- 1960-
.197 1971 L971. )C7A

Sta oes, Heat Re-

Siatant Stel 72 11& 203 21 33 41 44 9.8 7.2 9.1 7.6

6leotroplating 33 59 78 70 15 13 14 14 5.9 7.2 6.3 5.2

3upernickel Alleys 33 62 72 65 15 14 13 13 6.5 3.8 5.7 4.7

Alloyed Steels 28 50 61 55 13 ll 1i ll 5.9 5.1 5.7 4.6

Iron-Steel Castingu 26 U1 39 35 12 9 7 7 1.6 (-1.1) 2.9 2.0

Cupro-Nickel Alloya 9 15 16 ;5 4 3 3 3 5.2 1.6 i.2 3..,

Other Uses l 41 4e5 38 8 9 8 8 8.5 2.14 6.8 5.1

aotal 219 452 554 493 100 100 100 100 7.5 5.2 6.8 5.5

/a Excludingcentrallyplanned economies.

Notes: Data for 1970 snd ;974 were :aken from sources (1) to (4) with a slight adjus:Imen to include
consumption tn tne developing world, not included in the original soarces: this adjusterant was
madefor consisteney -ich Appendix Table 1.1. For 1950, consumption of nickel is discribuctd
among uses by applying the percentage structure in 1961 as obtained from source (2).

-jurces: (1) International lickel Cospany of Canada, Lcd., Annual Press Statement, virious years.
2) Bankers Trsse Company, London, Nickel - ChanAini ?atrern of Production and Consumotion,
November 1974, p. 4.
(3) Central Marketing Steven, Global Nickel ?rojections 1980 and 1985, April 1975, "anex 1.
(4) HoogoveRs 1. :tuidn 3V, Studv of the Fucure lickel Markec, October 1970, p. 1.

.
-tyaauy 1931 1-4

and 400-series.1/ Each series containsa large number of alloys of different

composition,but most of the nickel in stainlesssteel is in the 300-series
(it ranges from 6 to 22%). While accurate data on the relative ratio of nickel
in the two series are lackingworldwide, the 300-seriesaccounts for about
three-quartersof steel output in the US, and the share of the 300-ieriesin
total stainless steel seems to be rising.

7. Several factors account for the rapid growth of nickel use in stain-
less. Technologicaldevelopmentsin the manufactureof stainless,particularly
the adoption of argon oxygen decarbonizaton (AOD) 2/ have facilitatedthe use
in steel making of both inferiorquality scrap and nickel productswith lower
nickel content,particularlyferronickel. Such r'ckel products are used
mainly in the coolingmedium. Besides cost advantage, the gr2ater availability
of ferronickelsince the latter part of the 1960s has contributedto the growth
of nickel use in making stainless.

1/ Based on corversations
with various experts in the stainlesssteel
industry,the followir_may represent(total nickel use) for stainless
steels:
Carbon Nickel Chromium Othor - usually
Series Content Content Content small amountsof:
200 about .15% ;-6% 16-19% hanganese
300 under .15% 6-22% 16-26% molybdenum,titanium
400 .12-1.2% .6-2.5% 11-18% molybdenum
600 .06-.07% 3-8.5% 15.5-18% copper, aluminum
What is usually called austenitic(or chromium-nickel)
stainlessare
a combinationof varietiesfallingwithin series 200 & 300. Ferritic (or
straightchromium)is basicallyin series 400. Martensitic(or cutlery
grade) is also includedin special varietiesof stainlessunder series 400.
Series 600 stainlessdevelopssignificanthardnesspropertieswhen the
molten is cooled quickly.
2/ In addition,but to a lesser extent, the electroslagand vacuum processes
of remeltingalong with the Witten-process, have permittedthe use of
furnace chargescontainingmanv more impuritiesthan could be tolerated
previously.
 Tfbruarz 1951 i-I

. 8. A second factor in the rise of nickel use in stainlessis the favor-

able welding characteristicsand anti-corrosivequality of nickel-bearing
stainless steel (mainly the 300-series), compared with chromium-bearing ones
(mainly the 200-series). In particular, nickel-stainless is preferred for
piping for the chemical and petrochemical industries, for automobile-Making
and in a number of cryogenic applications (i.e. applications requiring very
low temperatures). Potential for future expansion in nickel-bearingstain-
less lies in the fie?d of nuclear energy and in the transport and storage of
natural gas.

9. Use in alloyed steels 1/ account for about 11% of total nickel con-
sumption;nickel is the favored alloyingelement in the structuralsteel
industry,where nickel is used to increase the hardness of structuralsteel.
However, since the 1960s, the use of nickel in alloyed steels has expanded
at a slightly lower pace than that of nickel consumptionoverall. Future
growth in this inte mediate use T-illdepend on the developmentof the lique-
field natural gas market.

10. Nickel is also used in iron and steel castings (about 7% of total
nickel consumption). The growth of this intermediateuse had been decelera-
ting in the past, and indeed a decline _n absolutevolume was experiencedin
the 1970s. Ironically,however, such a decline helped another nickel-bearing
sector, that of alloys with higher chromium content,which provide better
resistanceto corrosion. The slow growth in nickel use in castingshas thus
been accompaniedby an increasinguse of nickel in the more lucrative
categoryof supernickelalloys. This is but one small example of the some-
times complex interrelatedness
of nickel to other metals and among its own
differentend uses.

1/ Steel may be divided into three categories: carbon, stainlessand

alloyed. The first contains .04 to .06% carbon. Stainless is an
alloyed steel that must have chromium among its constituentelements
so that the stainless quality may be developed. Alloyed steels (as
used in this paper) are those to which alloying elements - other
than carbon and manganese, and excluding stainless steels - are added
to develop specificproperties. These alloying elementsmay include
one or more of nickel (which makes a category of alloyed steal that
is not "stainless"),molybdenum,tungsten, cobalt, titaniumand
aluminum.
1btwau 1981 146

11. Nickel electroplatingaccounted for about 14X of total nickel con-

sumption in 1976. Most nickel consumptionfor plating is In the automobile
industcy (e.g. for bumpers). The use of plating in a number of applications
in most durable and cheaper stainless categories is expected to decrease,
while aluminum and plastics In particularare likely to Increase (depending
upon relative future prices).

12. Among the remaininguses, nickel is an element In a number of super

alloys (these account for 132 of total nickel consuwption). It is used par-
ticularly in the civil and military aerospace industries,the making of
furnace elementsand parts, nuclear power generation,and a number of appli-
cations in the chemicaland petrochemicalindustries. Cupro-nickelalloys
account for a further 3% of total nickel consumption,but these face strong
competitionfrom titaniumalloys. The remaining 8% of total nickel consump-
tion covers a wide variety of uses: in coins, as catalystsor in the form of
salts and chemicals.

C. Classes of Nickel Product

13. The commercialforms of primary nickel fall into two classes.

Class I productsare essentiallypure, with a nickel content between 99% -
100%, and can generallybe used without constraintsfor many applicati-ns.
True Class I products include electrolyticcathodes (99.9% nickel) and
carbonyl pellets (99.7% nickel); briquets, rondels and nickel 98 are also
accepted as Class I products, although their uc 'q slightly restricted.

14. Class II products have a moderate range of residual elements; the

nickel content ranges widely from 1% to 96%. The3 are usually suitable for
specific limited applications. Class II products include the various grades
of ferronickel(40-50% nickel in the US, but 20-38% outside the US) and
nickel oxide sinter (either 76% or 90Z). A new product, incomet (94-96%
nickel), introducedin 1974, is replacing the oxide in sinter commercial
form. Nickel salts, also includedunder Class II products,contain 20-25%
nickel.

0
15. The proportionof nickel consumed as Class I or Class II products
differswidelyaong intermediate uses and variousmarkets. At present,
slightly over half the nickel outp'tt is consumedin "pure"form-- Class I.
Ferronickel and nickel oxides, both Class II, account for about 332 and 13X
respectively of total world nickel consumption. The shares of Class I and
Class II in Japan, havever, are about 25Z and 75Z, reflecting the dominance
of the steel industry as a user of nickel, while in Europe and the US the
ratio is about 652:35x. 1/

16. In the future, ferronickel'a share of total nickel demand is expec-

ted to rise rapidly. It is likely to make major inroads in the stainless
steel sectors and in the iron and steel castings category. The cost of ferro-
nickel is low comparedwith Class I nickels, and it was successfullyapplied
in the AOD steelmakingprocess in the mid-1960s. Such a developmentwould
particularlybenefit the developingworld. Nearly all the future ir.crements
in worldwidemarket economies'nickel productionwill come from the developing
countriesas well as Australia. Almost all new projects in the developing
countriesare designed to process the ore into ferronickel,since it is tech-
nically feasibleto process it from the kine of ore found there -- laterite --
which also requiresa less sophisticatedtechnologythan that for making
pure nickel products.

D. Nickel Ores and Resources

17. Nickel resourcescan be classifiedas either sulfide or oxide; the

latter are also called nickeliferouslaterite deposits. The largest concen-
tration of sulfide ores is in the Sudbury district of Ontario in Canada. Some
sulfide deposits also ex'st in the USSR and South Africa. Oxide deposits
are formed by laterizationover long periods of weatheringand erosion. They

1/ Hess, Guy C. and M. James Martin, Nickel IndustryStudy: Detailed

Quantificationof Supply-DemandOutlook, Cavanest House, Ontario,
Canada, April 1975, pp. 23-24.
t FTbxuaar1981 tm8,

are found near the surface, can be worked by open-pit methods and exist
mainly in tropical areas, i.e. mostly in the developing countries. In con-
trast to sulfide deposits which accounted, in the late 1960s, for almost two-
thirds of the nickel mined in the world, today oxides or laterites constitute
the major portion of identified world reserves, Such laterite deposits are
of two types: those in which silicates are predominant, and those with an
iron base. Silicate ores (also called garnierite) 1/ which comprise most
of the New Caledonia deposits, are richer in nickel content than sulfide
ores, usually exceeding 1.5%. The second type of laterite ceposits, nickeli-
ferous iron laterites, while rich in iron (45 to 50x), contains a low level
of nickel, about 1%. Most of the deposits in Cuba, Philippines, Indonesia
and other developing countries are this type of laterite deposit.

18. The laterite ores are more difficult to treat compared with sulphide
ores, although the mining itself is not so difficult. They are usually of
low grades, however, and the capital cost per ton of capacity for producing
nickel from laterite sources (i.e. cost of mining and processing taken to-
gether) is roughly about 170-180% that of producing nickel fron sulfide sour-
ces. Further, obtaining nickel from laterite is relatively labor-intensive.
After the increase in nergy costs in 1974, nickel production from laterite
sources has become more costly.

19. There have, however, been factors which have increased the cost
of production in sulfide mines. Some of the world's sulfide nickel
deposits, notably in Canada, have been in production for a long time, and
require deeper digging and usually in.olves lesser grade of ore. The
rising cost of miciingsulfide was further boosted in 1975 by the increased
t-ixesimposed by provincial and federal governments. Oxide ores (or later-
ites) could not be concentrated sufficiently for economic refining before

1/ Named after Jules Garnier, the French geolog'st who discovered New
Caledonia's silicate ores in 1867.
. mid-1960s,at which time that problem wa3 ov3rcome. Concurrently,the tech-
nological breakthroughenabling the use of ferronickelin stainless steelmaking
took place (as noted, most oxide ores are rich in iron). With the marked rise
in the price of nickel in real terms from the mid-1960s, the mining of laterite
ores acceleratedrapidly.
February 1981 I-10

REFERENCES

1. Alexander,William and Arthur Street, Metals in the Service of Man,

Pelican, 1972, pp. 225-232.

2. AustralianMineral Economies,PTY Ltd., Nickel Survey: Analysis and

Outlook, December 1977, pp. 3-5 and pp. 52-60.

3. Bankers Trust Company,London, Nickel - ChangingPattern of Production

and Consumption,November 1974, pp. 1-4.

4. Bonar, L.G., The ChangingOptions of Adding Nickel to Steel, a presen-

tation to the Metal Bulletin'sFirst InternationalFerro-alloys
Conference,Zurich, October 1977.

5. Brobst, Donald A. and Walden P. Pratt (eds.),United States Mineral

Resources,US Departmentof the Interior,Washington,D.C.,
1973, pp. 437-441.

6. Hesse, Guy C. and M. James Martin, Nickel IndustryStudy: Detailed

Quantificationof Supply - Demand Outlook, Canavest House, April
1975, p. 6 and pp. 23-27.

7. Hilmy, Joseph. "Old Nick" - An Anatomy of the Nickel Industry and its
Future,World Bank CommodityNote No. 13, 1979, pp. 1-3 and 11-18.

8. US Bureau of Mines, Mineral Facts and Problems, Washington, D.C., 1975,

pp. 735-737.

9. Varon, Bension,Review of the World Nickel Situation,World Bank Economics

DepartmentWorking Paper No. 10, 1971, pp. 1 & 2.

10. Varon, Bension,The Nickel Outlook Reassessed,World Bank, Economics

DepartmentWorking Paper No. 135, 1972, pp. 2-4.
February 1981 I-l

II. THE LOCATION OF THE INDUSTRY

A. Production

1. The patterr.of nickel productionhas changed significantlyover the

last quarter of a century in terms of the geographicalsources of the ore.
Between 1950 and 1977, world nickel mine productionincreased at over 6% per
year to reach about 780,000 tons in 1977. During that same period, output in
the industrializedcountriesexpandedmore slowly than in the rest of the
world, at 4.2%. Thus their share of world total output declined from 76% in
the early 1950s to 47% in 1977, while that of the developingcountries rose
substantiallyfrom 4% to 29%; the share of the centrallyplanned economies
registeredsmall change to reach _i% in 1977 (Table II-1).

2. Among the industrializedcountries,CaT.ada's

position declined
significantly. It providedover 90% of market economies'mine output in
early 1950s but now accounts for only about one-third of market economies'
production. The remarkablegrowth of productionin two other industrialized
countries- Australia and Greece - has not compensated fully for the slowdown
in Canada'sproduction. Australia'soutput rose from negligibleamounts ten
years ago to about 86,000 tons in 1977, and Greece, a non-producerin 1965,
produced 10,000 tons in 1977.

3. The outstandingrise in the develoringcountries'share of world

mine productionwas not only the result of the sharp expansionof nickel
mining productionin New Caledonia,but also of the emergence of a number of
new producers. Over the last 25 years, New Caledonia'soutput growth averaged
12% annually,to account for about 15% of world productionat present - a
level equivalentto that of the USSR (125,000tons in 1975/76). The Phili-
ppines, DominicanRepublic and Botswana,which were non-producersin the
early 1970s, contributed37,000, 25,000 and 12,000 tons respectivelyin
1977. In addition, Indonesia,which produced a very small volume in the mid-
1960s, now producesabout 16,000 tons.
 Table II1I: NICKEL - MINE PRODUCTION j
('000 metric tons nickel content)

Structure rlt
Average Average Average (2 of total) a..., rate)
1950-51 1960-61 1 70-71 1974 1975 1976 1977 1950-51 1977 1950-51 to 1977

Developed Countries 120.7 218.7 345.4 371.7 372.7 380.8 396.7 76 47 4.2
of which:
Canada 118.7 203.0 372.3 269.1 '42.2 240.8 235.4 75 30 2.6
lISA/a 0.7 10.8 14.2 12.8 13.0 11.9 10.5 - I
Australia - - 32.7 45.9 75.8 32.5 85.7 - 11
South Atrica 1.0 2.9 12.2 22.1 20.8 22.4 22.0 - 3
Greece - 9.6 15.1 14.8 16.4 9.6 - I

Developing Countries 5.9 54.4 112.2 201.2 206.4 206.6 223.8 4 29 14.4
of which:
Asia 0.3 0.6 12.9 16.4 24.2 29.1 53.0 - 7
o,f which:
Philippines - - - 0.3 9.5 15.2 36.8 - -
Indonesia - - 12.8 16.0 14.6 13.8 16.1 - -
Burma 0.3 - .1 0.1 0.1 0.1 0.1 - -

Africa 0.1 0.3 11.4 14.5 18.8 28.8 25.0 - 3

of which:
Bot swalia 2.6 6.3 12.6 11.8 - -

Latin America - 0.1 3.2 33.5 30.1 29.8 30.3 - 4

of which:
DominiicanRepubl_c - - .1 30.5 26.9 24.5 24.5 -
Brazil - 0.1 3.1 3.0 3.2 5.3 5.5 -

New Caledonia /b 5.5 53.4 144.7 136.8 133.3 118.9 115.5 4 15 11.9

Centrally Planned Economies 31.6 84.1 155.8 163.9 173.9 179.3 184.5 20 24 6.8
of which ___
USSR 31.0 66.5 110.0 120.0 125.0 130.0 135.0 20 17 5.6
Cuba - 16.3 36.6 33.9 37.3 36.8 36.5 - 5

TOTAL
World (excl. CPEs) 126.6 273.1 517.6 572.9 579.1 587.4 593.5 sO 76 5.9

World (incl. CPEs) 158.2 357.2 673.4 736.8 753.0 786.7 778.0 100 100 6.1

/a Recovered nickel content. This may differ slightly from nickel content of ores mined.
/b Ni and Co content of the mining production to 1961, and only Ni content thereaftes.
- Nil

Source: Metallgesellschaft AG, Metal Statistics, various issues.

 February 1981 II-3

4. Smelter is less concentratedthan mining. About one-fifthof world

refined output is produced in Canada, as against one-third of world mine pro-
duction. Another one-fifth is produced in Western Europe from Canadian and
New Caledoniansources,while Japan refined 13% of world's total from imported
ores.

5. Negligibleamounts of concentratewere smelted in the developing

countries in the early 1950s. However their share at present amounts to 13X
of total world refined output and most of it comes from New Caledonia and the
Dominican Republic. The developed countries still dominate the world picture,
refiningover 60% of world's total (Table II-2).

B. Reserves

6. Known world reserves 1/ (Table II-3) are estimatedat just under 60

million metric tons. At historicalrate of consumptiongrowth of about 6% per
annum, they are sufficientto run well beyond the middle of the next century.
However half the world reservesare found in the developingcountrieswhich
account for 29% of current mine production. New Caledoniaand Indonesiato-
gether account for 40% of world reserves and the Philippinesanother 9%.
Among the developed countriesCanada and Australia have the largest reserves
of over 26% of the world's total. Furthermoreabout 80% of known reserves
constituteof costly-to-exploitlaterite ores against a ratio of some 35% in
current output (see also pp. 7-9 of Section I of this handbook). These fac-
tors, and the potentialof mining nickel from the sea, indicatethat nickel
production in the next decade or two is likely to witness significantstruc-
tural changes with regard to the sources of supply.

1/ Reserves include only "measured"and "indicated"quantitiesexpressed in

metal content.

.
 Table II-2: NICKEL - SMELTER AND REFINED PRODUCTION /a

('000 metric tons nickel content)

Structure Growtb

Average Average Average (2 of total) annal rate)

1950-51 1960-61 1970-71 1974 1975 1976 1977 1950-51 1977 L950-51 to 1977

122.8 243.0 421.9 461.7 430.9 465.2 429.8 79 61 4.7

Developed Countries
of which:
67.1 127.3 191.7 197.0 178.0 176.4 155.7 43 22 2.5
Canada
USA 17.8 11.4 14.1 12.6 19.9 30.8 34.4 11 5 2.4
Japan 0.1 20.9 96.2 104.6 78.0 94.8 93.9 - 13 28.9
Australia - - 7.5 20.5 32.9 39.9 37.4 - 5
UK 22.5 36.2 37.7 35.7 38.8 36.0 23.2 14 3
Norway 10.6 31.3 40.2 43.2 37.1 32.7 38.2 7 5 4.9
Greece _ - 9.6 15.1 14.8 16.4 9.6 1

0.8 12.4 39.3 93.3 104.3 96.7 95.1 1 13 19.4

Developing Countries
of which:
New Caledonia /b 0.8 12.4 30.1 48.5 52.8 38.2 28.3 1 4 14.1
Dominican Republic - - .1 30.5 26.9 24.5 24.5 3
Brazil - - 2.5 2.3 2.2 2.2 2.5
Philippines - - 9.4 15.2 21.9 3
Indonesia - - - - - 3.4 4.9 1

Centrally Planned Economies 31.7 87.1 152.2 161.1 174.1 182.1 186.6 20 26 6.8
of w,hich:
USSR 31.0 66.5 125.0 134.5 143.0 151.0 155.0 20 22 6.1
Cuba - 16.3 18.1 14.9 18.5 ",.0 18.0 - 3

TOTAL
World (excl. CPEs) 123.6 255.4 461.2 555.0 535.2 561.9 524.9 s0 74 5.5

155.3 342.5 613.4 716.1 709.3 744.0 711.5 100 100 5.8
World (incl. CPEs)

/a Smelter and refined production includes primary nickel and nickel contained in ferronickel. nickel oxide sinter and monel svelter directly
from ores.

/b As of 1972, only nickel content; until 1971, nickel and cobalt content.

nil
less than .5%

Source! Metallgesellschaft AG, Metal Statistics, varli,'sissues. I

* *~~~_______ a.
a
 Uebruory 1981 11-5

0
Table II-3: NICKEL RESERVES,/L 1979

Ore Z of
('000 aetric ton) World Total

D_vmled Couttries 15,400 26.7

USA 200
Canada 9,600 16.7
Australia 5,600 9.7

Developing Countries 30,700 53.3

Dominican Republic 1,100

Colombia 900
Guatemala 300
Brazil 200
Indonesia 7,800 13.5
New Caledonia 15,000 26.0
Philippines 5,400 9.4

Centrally Planned Economies 11,500 20.0

Cuba 3,400 5.9

USSR 8,100 14.1

WORLDTOTAL 57,600 100.0

/a Reserves include only "measured" and "indicated " quantities

expressed in metal content.

Sources: US Bureau of Mines, Mineral Commodity Summaries, 1979,

and furthvr details obtained from the US Bureau of Mines,
US Department of the Interior, Washington, D.C.
February 1981 11-6

C. Secondary Sources

7. Nickel scrap is derived from two sources. The first is the scrap
produced in fabricatingplants from metal machined away in the process of man-
ufacturingfinal nickel-bearingproducts; they take the form of cuttings of
stainless steel, nickel alloys and ferro scrap. Such "new scrap" is consumed
either directlyas "run-around" scrap in plants producing superalloysand
stainless steel 1/ or as "prompt industrial" scrap in the nickel smelters and
refinieries and steel mills. (This scrap is reused in a 6-8 month cycle.)
The second source - "old scrap" - is obtained from obsolete nickel-bearing
materials (the cycle is 15-20 years).

8. Nickel scrap is a significantcomponentof total supply. Except

for the US, no data are available about its magnitude,as nickel scrap is
usually includedwithout identificationin the statisticson refined nickel
output. US data, however, suggest that nickel scrap accounts for about one-
quarter of output and consumption. The same ratio probably applies worldwide.

D. Consumption

9. From 1950 to 1977 the pattern of nickel consumptionamong the main

world regions changed very slightly. The industrializedcountries at present
account for almost seventy percent of world nickel consumption,centrally
planned economies28%, and developingcountries 3% (from negligibleamounts
in the early 1950s). However, in the industrializedcountries,a notable
structuralchange took place. The two most mature economies - the US and the
UK - increased their nickel consumptionslowly, at about 2% per annum each,
and Germany, France and Sweden also recordedhigher than average growth in
nickel consumption(Table II-4).

1/ In the case of superalloys,separatingits constituentelements is

technicallydifficult and expensive;hence such scrap is only used when
the ratio of the componentelements is known within fairly close limits.
Further,while the amount generated in scrap is significantlyhigher in
the making of nickel alloys thianmost of other materials,the loss in
recycling is also high. See, e.g., John D. Corrick, "Nickel",Mineral
Facts and Problems,U.S. Departmentof the Interior,1975 edition,
p. 742. _
 * . ' :
lableI 11_: NICKEL CONSUMPTION /a

('000 met r it tons ni,-ke I conltent C

Structure Gro _tn

Average Average Ave.age (% of total) (Z annual rate)
1950-51 1960-61 1970-71 1974 1975 1976 1977 1950-51 1977 1950-51 to 1977

Developed Countries 123.5 220.3 417.6 540.9 394.3 475.0 444.4 79 69 4.9
of which:
USA 84.7 102.8 141.2 194.5 132.0 152.7 146.0 54 23 2.0
Japan 0.8 19.2 90.5 115.9 83.3 1 5.0 97.3 15 19.4
C;ermany 5.3 22.5 37.6 61.2 42.8 56.2 54.2 3 8 8.9
France 5.2 17.7 34.1 40.5 31.9 33.5 35.8 3 6 7.4
UiK 17.6 27.2 34.3 33.5 27.0 30.5 30.5 11 5 2.1
Sweden 3.1 8.8 21.1 31.9 22.0 24.0 17.5 2 3 6.6

EEC-9 30.4 76.7 128.7 161.3 124.1 147.6 147.3 20 23 6.0

Europe 34.5 91.8 161.4 209.3 160.6 187.7 184.8 22 28 6.4

DevelopinC tries 0.3 2.0 h.5 13.0 14.7 18.4 21.9 .. 3 17.2
of which:
Asia 0.1 1.0 2.9 5.4 4.9 6.9 8.9 1 18.0
of which
I id ia 2.1 2.8 3.3 3.5 5.6 1

Africa /b - - .6 1.0 1.2 .2 1.2

Latin America 0.2 1.0 3.0 6.6 8.6 10.3 11.8 2 16.3
of which:
Brazil 1.6 4.2 3.8 4.7 6.0 1
Mexico .6 0.7 3.0 4.0 3.5

Centrally Planned Economies 32.0 84.5 127.5 153.3 165.5 376.7 182.4 21 28 6.7
of which:
UISSR 105.0 115.0 121.0 125.0 19

TOTAL
World (excl. (.PEs) 123.8 222.3 424.1 553.9 409.0 491.4 466.3 79 72 5.0

World (inml. CPEs) 155.8 306.8 551.6 707.2 574.5 670.1 648.7 100 100 5.4

/a Including' nickel content in ferronickel, fonte and nickel oxide sinter.

Tb IBRI) estimates.

less than 0.5%

S nil

Source: Mlet.allgesellschaft AG, Metal Statistics, various issues.

rTbruan 1981 1-8

10. The share of developingcountries in world consumptionhas in- S

creased since the beginning of the 1970s, but still representsonly 3X of
the total. Mexico, Brazil and India, experiencingrapid industrialization,
account for almost all the increment in the developingcountries'nickel
consumption. Between the mid-1960s and 1976, the use of nickel in Mexico,
Brazil and India increasnd by 452, 162 and 13% respectively, though from an
admittedly low base.

11. The nickel consumption in market economies rose annually by 5.6%

in the 1950s; between 1960 and 1974 the rate increased to 6.8%. Thus the
average over the 1950-1974period was 6.5% per annum. With the slowdownof
economic activitiesthat followed,the growth of nickel consumptionaveraged
less than 3% per annum between 1975 and 1979; most of the recoveryoccurred
within the last two years. The major part of the increment took place in the
use of nickel in the steel industry (stainlessand heat resistancesteels,
alloyed steels and steel castings),which accounts presently for more than
60% of total nickel consumption. On the other hand, nickel electroplating
(14% of total nickel consumption)has been facing strong competitionfrom 0
alternativematerials,mainly aluminum, plasticsand cheaper stainlesscate-
gories; these are expected to continue replacingnickel, particularlyin the
automobileindustry.

12. Consumptionof nickel by intermediateuses was detailed under

Section I of this manual (paras. 5-12). The steel industryaccounts for 60%
of world market economies'consumption (stainlessand heat resistencesteels,
alloyed steels, and iron and steel castings),nickel electroplating14% and
non-steelnickel alloys, nickel salts and oxides (26%).

E. Trade

13. Nickel materials are heavily traded (Table II-5), and total trade
flows approximatetotal annual production. The centrally planned economies

0
 February 1981 11-9

O are self-sufficientin nickel as a group; consumptionusually equals produc-

tion and very little trade takes place with the market economies. Among
market economies,the developingcountries raised their share of total exports
from 17% in 1960 to 35% in 1977. This reflects the sharp expansion of the
developingcountries'nickel mining ouitputslnce late 1960s.

14. The trading pattern for nickel involves two categories- raw
material (SITC-283)and nickel producrtand alloys (SITC-683). The first
includesore, concentratesand matte, while the latter comprises ferronickel.
nickel oxide and all categoriesof Class I nickel. The raw material nickel
categorymakes up about one-third of tle market economies'total trade, a
ratio unchanged over time. The same ratio also applies to the developing
countries'nickel exports. However,within the raw material nickel category
of the developingcountries,the share of ores and concentratesrose from 6%
to 14% of the total market economies'total exports between 1960 and 1977,
while that of matte declined from 26% to 20%. This is explainedmainly by
the fact that a significantamount of the exports of New Caledonia,the major
developingcountry producing nickel, was sent to Japan. Japan insisted,
until recently,on importingnic';elin raw form (mainlyores and concentrates)
to feed its large refiningcapacity. Two other developingcountriesexport
their nickel in raw form. Botswana ships its output to the parent company's
(AMAX)refineriesin Port Nickel, Louisiana,while Indonesia'sproduction
goes to Japan, also in ores and concentratesform. On the other hand, the
remaining developingcountries- the Dominican Republic, Brazil and the
Philippines- refine their output to ferronickel. They are, however, r.ew
to the mining of nickel and have either just started productionor extended
their output significantlyin the early 1970s. This increasein the latter
countries did not outweigh the rise in nickel raw material exports from New
Caledonia,Botswana and Indonesia;hence the ratio of raw material to nickel
products exports in the developingcountriesdid not change over time.
February 1981 II-10

Table II-5: OF NICKEL EXPORTS

SUMQA.RY

1960 Structure 1977 Structire

Amount Amount
('000 tons) ('000 tons)

DevelopingCountries
Ores and Concentrates 19 6% 69 14% 342
Matte 11 26Z 1 32Z 24 202
Productsand Alloys 22 68% 80 66%
52 100% 173 100%

IndustrializedCountries
Ores and Concentrates 0 0 0 0
Matte 66 26% 76 242
Productsand Alloys 183 74% 246 76%
249 100% 322 100% 0
World Total
Ores and Concentrates 19 6% 3 69 14% 34%
Matte 77 26% 32 100 20
Productsand Alloys 205 68% 326 66%
301 100% 495 100%

Shares of:
DevelopingCountries 52 17% 173 35%
IndustrializedCountries249 83% 322 65%
301 100% 495 100%

Sources: Tables II-6 to II-9.

.
 Table 11-6: NICKEL EXPORTS, BY COUNTRIES

('000 metric tons metal content) w

%0

1962 1963 1964 1965 1966 1967 1968 1969 1910 1971 1972 1913 1974 1Y75 1976 1917
19o0 1961

De..Cloped_(ountrie. 249 294 i 2

t26 j2 31L ]19 _ J42 291 ASO 1in
g inJ M NJ l J322
of .hichi: 214 706 175
118 220 190 188 216 234 225 2Z1 236 191 267 2S8 246 272 256
(:anadj 34 21
3n 28 24 34 32 31 29 31 36 31 40 40 43 44 30
Noa~.i y 28
2t 30 iS 35 34 40 53 43 45 44 AS Sl 41 42 40 11
UiK 27 2H
8 11 6 8 II 11 8 6 13 14 23 25 39 39(1) H (E) 39(1)
Pr s-e-a 6 6

41 61 62 76 63 111 Itl 149 148 129 US 110 172 165 l3l(1)

I) veoPsI1gK Ceuntl 52 5S 32
of jilcim:
NeiwCulIdOn ia 52 55 32 40 59 59 73 19 116 126 138 132 98 in Lb j] O2S 100
I I I I 2 2 2 3 2 2 3 3w1
Irmeil - - I
1 I
- - - - - - - - - IS 25 25 22 22 22(E)
heluiczan R.pub.lIc - - -
- _ - - _ 2 4 10 9(1)
otwA, -
13 14(E)
- - - I 2 2 3 4 4 9 14 14 IS 15 14
Indow,-,I- - - - 7 12 25(E)
- - - - - - -
I.I. IppInIP _
524 412 545 543 4ff5
Wortd 1otalb 301 349 293 303
- -
360 380 386 395 452
-
422
- ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~n
529 527 512 m

la 1970-;7 ?icludes ferronickel. data on farroujikelwere not avallable for previous years.
/b EXCls.lingcentrally plained economics.
(E) Eotittatc

Sources: UK Instituteof Geologicst Sciences, lineral Resources Division, Statistical Suueary ot the mlineralIndustrt, verlous issues;
[INjearbobk of Internatlonal Trade StatlsticS, Vorious #sHuom;
Inx7:iluF de RrEilon dTo-ufi&gers l.eNlcieen Muuvelle-Caledonle en 1977, New Caledona;le
Ministry ot NatuJralHeaOUrVeg. Ontario, Canada, Towards a Nickel Polic._for Lhe ProvHicc of ont.arlo,t977.
 -T?- r

Table II-7: NICKEL EXP'ORTSBY PRODUCT

('OOO metric tons of metal content)

19t0 19ol 1942 19t J 19t4 190 1960 196J7 1968 1969 1970 1971 1972 1973 ISSt 1975 1974 1977

t) r-s gi-2d C- -e Lr a t-
Dev.l6pindt co glltrlest 19 20 12 12 23 2tl 24 31 54 65 90 92 Si (A 7* 76 72 6 Z
New) C Icdollta 19 20 12 12 22 to 22 30 So 61 Si 78 43 49 58(e) *§{Ys) 46
'I liotsw a - - - - - - - - - 2 4 lo * (lt)
luldonel Ial_
- - - - ~ ~ ~ ~ ~ ~ ~ ~ ~~1
2 2 3 4 4 9 14 14 1; IS 14 Is 14(t l

Wu. Id Li,1 2tt 220 21 S' 65 Li i «Z ai t e

Matt.
D-veloped Countries;
Canada 66(£) 81(E) 70 66(E) 71(F) 75 74 (E) 74 (E) 85(E) /0 as 106 104 91 as 84 73 76{£>)

e CoLtiztries:
New caledoiita 11 12 9 13 13 14 IS 12 IS I 15 IS
is 16 is *0 2)(0) 22(4) 24

we rId/b )7 9 9 7 84 89 89 8b lOt3 85 103 121 120 W0 lft mos 96 tOo

Deeu
4Cuu tLrtes:-- 183 213 191 19b 2218 242 236 238 256 2Zi 292 273 279 3311 3*2 2119 3Q4 246

Cassels 112(E) 139(E) 120 122(V) 145(E) 159 I51(1!) 147(E) ISM() 111 119 152 142 lei kill 130 135 99(E)
Norvay 28 30 28 24 34 32 31 29 31 36 37 40 40 43 30 34 21
tUK 27 28 26 30 35 35 34 40 53 43 45 44 45 Sl 61 42 4<1 317
Frsgice /d b 6 8 11 6 a It 11 a 6 1.3 14 23 2S n 39tMl 39(lt) 39tE)

1lkveloeplng Countries / 22 2J If 16 25 Z9 37 38 42 St 44 41 Sb 63 74 75 70 so
New Caledoniao 22 23 If is 24 28 36 31 41 so 42 39 39 IS 47 44(E) J1#E) 3tt
BreerAl _ I I I I I I 1 2 2 2 1 2 2 3 MlE
bouintcan Rep. - - - - - - - - - IS 2S 25 22 22 2Z(N)
Pl ilpptnes - - - 12 25(E)

World /b 205 236 202 212 253 271 273 276 298i Z7Z 33t 314 J3S 401 437 364 374 326

'Iotal World
Ni-ke o
'Mottl 349 29J 303 360 380 386 39S 452 422 529 527 St 17445 53 t

/u ]u1c Itd's Hatfe.

/1. t!.tudes centrally plan ked econowle.
/c l hctud s othe¢r developed countries.
jdi 1970-71 includes ferrog tckel; datta "a lereirotikel were *vatllble for prevLour years.F
2ir Exclusively terro-ilckel t.
(E)- efi
Note- ILtl!i ey 'd due Lo rousidit lg

6--irces: UKs Hwastlute ot Oeoelogl al Scle ices. MHteral Rtesourcesl ttIvI.on, Stattstical Suns%ayv of tle Mineral Inodustry vArLous 1tstw*;
1IlN,Yeatbook otfI nt.anatiunal Trade Statistics, varl.u Issues^;
lzestiul
dH1:fiX10nd@Oute~Her. aNce t-blcldne.n 1977. New Cdl dunls;
hfiil iiy of N.1ural Reasourcem, outarto. Canada. T t.8 at Nl-licl r lty fr tle Yovtnce of! 4rt 1977-
 Table II-8: NICKEL IMPORTS, BY COUNTRIES

('000 metric tons metal content)

1960 1961 1962 1963 1964 1965 1966 1967 1968 19b9 1970 1971 1972 1973 1974 1975 1917 1917

Dzvelod Couitrleas 280 332 311 313 350 380 391 402 409 400 490 SOO 463 $0l Q JL0 460 480

ofu.h : a 8 a a 12 12 14 114 113 i8 17 20 17 23 26 24 24

Norwlay 31 32 30 28 25 30 31 27 39 35 41 50 43 45 41 40 34 36
.Idpa 26 29 2tl 19 35 29 38 59 51 68 95 97 92 105 126 4 lOG 112
tiK 66 72 53 57 7Z 72 80 70 71 56 84 98 60 se 643 60 i5
tJS 72 106 106 97 92 112 102 103 102 94 110 95 119 1it 135 309 113 116

D.-veYe!!ng (,ountries 4 5 5 4 5 5 4 1L 6 8 9 *(E) 1(U) j) 12(1)

(tE) 1t1()

Uortd TothaL-
~~~~~~~-_ 284 337 316 317 355 385 39. 408 416 406 498 509 491
=
1U0
=
548 4tl
_=
472
-
41.1

t. Ejluding ceuatrally plannued ecuolowles.

Sourc.#: UIK lo-titute of C.-ololl S-ce s Min.eral llesources Dtviston, StatibLt.sl Summary of te Mncwraal Induosty. v-urauis lasue
UN yvirbook Of J.iten
... ationadl Trrdel StutiLhtCs. various L.ouev.
 Table 11-9: NICKEL IMPORTS,BY PRODUCT

('000 metric tons metal content) t

1965 1966 1961 1968 3969 1970 197) 1972 1973 1974 1975 1975 1917
1960 1961 1962 1963 1964

I)re, amidJCobtn&eptea
Develop.d Couitries 28 30 20 20 32 28 36 47 50 62 84 8s sO 90 107 6 W Il 0

26 28 18 18 31 26 34 45 48 60 82 86 78 Be 105 84 ss
Japair- 2 2 2
2 2 1 2 2 2 2 2 2 2 2 2 2
FrawceLe 2(E) 2

30 20 210 32 28 36 47 S0 62 84 o a8 js 0 0 ii|
World 28

Mlatte
69 62 72 69 66 77 66 96 99 82 76 79 13 J2 17
Developed Couwtrie. 70 74 65
31 27 39 35 48 S0 41 45 41 40 36 3h
Nuruay 31 32 310 2H 25 30
38 39 38 31 48 49 39 31 32 43 36 40
UK 39(E) 42 35 41 37 42

72 69 66 77 66 96 99 82 74 19 63 72 15
W.-Id 70 74 65 69 62

Ref imed amId All°Y!

224 256 280 286 289 282 212 310 313 321 335 314 301 300 304
Developed Co ntriesLb 182 228 226
of %I.chl:
97 92 112 102 103 102 94 110 95 19 116 135 109 113 115
U.S 72 306 106
11 10 it 11 12 12 16 16 18 15 21 24 22 22t()
ra-nce o 6 6 7
I 2 1 4 3 4 14 S 8 13 11 14 18 21 10 14 14(g)
1 ilipimfl -
lKl; 271Kb 30 18 16 35 30 42 32 32 25 36 49 21 27 32 30 24 25(1)

5 4 6 7 6 a 9 8(E) 7(s) *(E) 1o(E) 12(K) II(E)

DkvelopingK CoiinLriesa 4 5 5 4 5

228 261 285 290 295 289 218 318 322 329 342 M2 311 312 322
WonI ld!S lob 233 231

W,,rl I lotrl
385 395 408 416 406 498 509 491 508 5 460 472 49
Nickel lrts/¢ 284 317 316 311 355

/a IlnIcides NStte.
0 b ,cl.ode. otlher developed countries. tiact, are est imated.
/c EKacides Centrally planned ecomu_lea.

Sot.r.--Us: Ijins(t {.te of Ceological Sciences. Mimieral Resources Diviulon, Stetiatical Summary ot the Hlneral In u*t!2y verloAe Issues;
UN YeYarbook of Interalbaonal Trade Statlutics various issues;
i.aitiu-t .ci.otid0ncre- er leNickel
Ne en Nouvelle-Caledonie
a Nickel
an 1977. Nw Caledonla;
Policy tor tNe Province of Ontario, 1977.
tiii.isiy iii Nattutal Resources, (Intrio. Canada. rowards
 February 1981 II-15

. 15. The flow of nickel is basically from the producing areas to the
refineries,which are mainly owned by the parent-producingcompanies,and from
the refineriesto the main nickel-consumingcountries in Western Europe and
the US. New Caledonia and Indonesia ship ores, concentratesand matte to Ja-
pan, which also imports some concentratesfrom Australia. SLN production in
New Caledonia goes to France. A significantamount of INCO's Canadiannickel
output is refined in the UK, Falconbridge'sin Norway. Further, some matte
from Canada is sent to the US. This pattern is likely to continue in the fu-
ture but with more ferronickel,and perhaps other refined forms of nickel,
exported from the developingcountries.

.
February 1981 II-16

0
REFERENCES

1. AustralianMineral EconomicsPty, Ltd., Nickel Survey Analysis and

Outlook, December 1977, pp. 33-37 and pp. 62-75.

2, Bankers Trust Company, London, Nickel - ChangingPattern of Production

and Consumption,London, November 1974, pp. 1-3 and pp. 6-10.

3. Energy, Mines and Resources,Canada, Nickel, Mineral BulletinMR157,

Mineral Policy Series, 1976, pp. 23-32.

4. Hesse, Guy C. and M. James Martin, Nickel IndustryStudy: Detailed

Quantificationof Supply - Demand Outlook, CanavestHouse, April
1975, pp. 7-27 (particularlygood on trade direction,pp. 17-21).

5. Hilmy, Joseph, "Old Nick" - An Anatomy of the Nickel Industryand its

Future, World Bank Commodity Note No. 13, 1979, pp. 3-11, 19-22
and 30-33.

6. InternationalNickel Company of Canada (INCO),Annual Press Statement,

various years.

For statisticalmaterial:

1. Metallgese'.lschaft
AG, Metal Statistics,various issues.

2. UK Instituteof GeologicalSciences,Mineral ResourcesDivision,

StatisticalSummary of the Mineral Industry,various issues
(mainlytrade data).

3. UN Yearbook of InternationalTrade Statistics,various issues.

4. Institutde Mission d'Outre-Mer: Le Nickel en Nouvelle-Caledonieen

1977, New Caledonia (on New Caledonia'sdata).

5. Ministry of Natural Resources,Ontario, Canada, Towards a Nickel

'olicy for the Provence of Ontario, 1977 (on national Canadian
data).

0
 February 1981 III-1

III. THE STRUCTURE

OF THE INDUSTRY

A. Degree of Integration; Control

1. The ownership of nickel productionis highly concentrated,one of

the most concentrated among the major metals. The industry as a whole has a
significantdegree of vertical integration. While most of the integrationis
from mining of ore through refining of metal, the InternationalNickel Company
of Canada (INCO) is integratedfrom mining to the fabricationof metal pro-
ducts. On the other hand, nickel producers in Japan import all their ore and
matte. Furthermorethe industry is almost totally privately owned.

2. In the early 1950s, one company, INCO, alone controlledabout 85% of

total world output. The company currentlyoperates a large number of mines,
ore concentrates,smelters and refineriesin Canada and also refines a signifi-
cant amount of productionin Clydach,Wales. INCO's dominancebegan to erode
in the mid-1950swhen it refused to participate in the JS government'splan to
build up a stockpileof nickel under the General ServicesAdministration.
* This left a vacuum which was soon filled by new companiesassured of a market
for their productsbecause of the stockpilingoperation. INCO's share of
total market economies'productiondeclined gradually to about 35% by 1976.

3. At present, three of the companieswhich have traditionallydomina-

ted the industrystill account for half the total world market economis'
nickel output (Table III-1). They are INCO, Societel
MetallurgiqueLe Nickel
(SLN) and FalconbridgeNickel Mines Ltd. SLN operatesmines and smeltersin
New Caledoniaand produces nickel rondellesat Le Havre, France; it contri-
butes about 12% of world output. 1/ Falconbridgeowns a number of mines and
smelters in Canada and refines the larger part of its output in Kristiansand,
Norway; it providesabout 6% of total current world production.

1/ The original company (Sociedte

Anonyme Le Nickel) experiencedsevere
financial difficultiesin 1973. It changed its name to Imetal in 1974
and sold 50% of its New Caledoniannickel intereststo SNPA (Societe
National des Petroles S'Aquitaine). The new company is now called
Socie't MetallurgiqueLe Nickel (SLN). Imetal has interestsin a number
of other metal companies: Penarroya (Europeanlead/zinccompany),Nippon
Nickel (Japan),Morro de Niquel (Brazil). SLN is involvedwith Penamax
and Amaxim in joint ventures.
February 1981 III-2

Table III-1: CORPORATE

STRUCTUREOF THE WORLD/a NICKEL INDUSTRY

(E of total deliveries)

1955 1965 1970 1974 1976

InternationalNickel Co. Ltd. 67.1 61.1 43.9 39.1 35.0

Societe MetallurgiqueLe Nikel 5.1 8.7 10.8 9.6 11.5

FalconbridgeNickel Mines Ltd. 9.4 9.0 7.1 6.4 6.1

SherrittGordon Mines Ltd. 6.5 3.3 1.9 2.1 2.1

Hanna Mining Co., Inc. 4.1 3.1 2.2 2.2 2.0

Western Mining Co., Inc. - - 3.4 7.2 8.0

Other Producers /b 7.8 14.8 30.7 33.4 35.3

TOTAL 100.0 100.0 100.0 100.0 100.0

/a Excludingcentrallyplannedeconomies.

/b Largely independentJapanese in New Caledonia.

Sources: Bankers Trust Company, London, "Nickel - Changing Patterns of Produc-

tion and Consumption," 1974, p. 5 - for 1955, 1965 and 1970 data;
estimates based on various reports and data obtained from the US
Bureau of Mines for nickel delivery in 1974 and 1976.
February 1981 III-3

4. These three companies had contributedover 80% of total world

deliveriesin 1955, but accounted for only 53% in 1976 - or an estimated 60%
of total world capacity (both shares refer to data for world market economies).
These figures still suggest a higher degree of concentrationthan in any other
major natural resource. For example, in mid 1970s, even in aluminum it takes
the six largest companiesand in petroleum all the "seven sisters,"to
account for 60% of world productive capacity in aluminum and petroleum
respectively.1/

5. About 40 other companiesaccount for remainingworld nickel produc-

tion: their share of the market is likely to expand in the future. Aimong
the newcomers is Western Mining CorporationLimited of Australia,which proba-
bly produces 8% of current world output, and a number of independentJapanese
mining companieswhose share as a group has been rising rapidly

6. In such an oligopolisticstructure,the three major producers,and

particularlyINCO, were the price-settersfor the world nickel market. Their
policy has been to maximize their profits by weighing the impact of their
productionstrategieson market prices. Other producers,the price-takers,
tended to increasetheir productionas long as their marginal revenue
exceededmarginal cost, thus leaving to the major companies the task of
balancing supply and demand. During the last few years, the oligopolistic
structure of the nickel market has been eroding slowly, particularlyas excess
supplieshave been rising rapidly. Since a year ago, the three major compan-
ies have abandoned their previous policy of quoting comparableprices for simi-
lar categoriesof nickel. Further, most of the incrementof future output is
expected to come from the non-major companies. The market for nickel is
likely to be relativelymore competitive in the future.

1/ T.H. Moran, The InternationalPoliticalEconomy of Cuban Nickel Develop-

ment, a paper preparedfcr the InternationalConferenceon the Role of
Cuba in World Affairs, Universityof Pittsburgh,November 1976, pp. 3-4.
February 1981 III-4

B. Barriers to Trade

7. There is little barriers to trade in nickel and tariffs if any are

nominal. The following tariff structureon nickel products in the US as of
January 1, 1981 is typical of most countries:

Table III-2: TARIFF STRUCTURE ON NICKEL IN THE UNITED STATES

Item Number Most Favored Nation (HNF) Nou-MFN

1/1/81 1/1/87 17/181
Nickel ore and concentrates 601.36 Free Free Free
Nickel oxide 419.72 Free Free Free
Ferronickel 607.25 Free Free 3¢/lb.
Unwrought nickel 620.03 Free Free 3¢/lb.
Waste and scrap 620.04 Free Free 3¢/lb.
Nickel powders 620.32 Free Free 3¢/lb.
Nickel flakes 620.30 4.4c/lb. Free 14¢/lb.
Other, over 10% nickel 603.60 Free Free Free

Source: U.S. Bureau of Mines

0
 February 1981 III-5

0 REFERENCES

1. AustralianMineral Economics Pty. Ltd., Nickel Survey Analysis and Out-

look, December 1977, pp. 38-42.

2. Bankers Trust Company,London, Nickel - ChangingPattern of Productionand

Consumption,1974, pp. 5-6.

3. Bureau of Mines, Mineral Commodity Summaries. 1981, US Departmentof the

Interior,Washington,D.C., p. 104.

4. Mathews, Norman, Nickel, US Bureau of Mines, Departmentof the Interior,

May 1979, pp. 1-2.

5. Moran, T.H., The InternationalPolitical Economy of Cuban Nir:kelDevelopment,

a paper prepared for the InternationalConferenceon the Role of Cuba
in World Affairs, Universityof Pittsburgh,November 1976.

6. Varon, Bension, Review of the World Nickel Situation,World Bank Economics

DepartmentWorking Paper No. 108, 1971, pp. 2-4.

.
* February 1981 Iv-1

IV. ECONOMIC PARAMETERSUSED IN THE

MARKET ANALYSIS OF THE INDUSTRY

A. Demand Elasticities

1. The income and price elasticitiesof demand for nickel (estimated

for the six major consumingcountriesusing a single equationprocedure)are
of the followingorder of magnitudes:

Income elasticity/a Price elasticity /a

USA 1.58* -0,93*

Germany,Fed. Rep. 2.13* -0.85*
France 1.72* -0.55*
UK 1.71* -0.87*
Sweden 2.78* -0.28
Japan 2.22* -1.03

/a estimatedusing the followir.g

functionalspecification:
ln Ct - a + 6 ln GNPt + y ln Pt

where:
C = consumptionof nickel, GNP = real gross national
product and P = deflated price of nickel.
* estimatessignificantat the 95% level or above.

2. Nickel demand appears to be quite income elastic. The value of the

price elasticityof demand is uniformly less than 1. C-4 en the probable
biases in the estimates,these values can only be taken as broadly indicative.
The nickel intensity,defined as the volume of nickel used by producersof
semi-fabricatedproducts (i.e. "consumed"by them) per unit of GNP, is falling
in industrializedcountrieswhere industrializationhas already reached a
mature stage. Evidently,a sharp rise in nickel consumptionper unit of GNP
usually accompaniesthe early stages of industrialization- countries such

.
February 1981 IV-2

as Mexico and Brazil fall in this category. This reflects two factors:
the establishmentof heavy and basic industrieswith their increasingrequire-
ments of metal intensive investmentgoods, and the sharp rise in the demand
for metal intensive consumerdurables - all being relativelyheavy users of
nickel. A rapid advancementin nickel applicationtechnologyexplains the
exceptionallysharp increase in nickel consumptionin Japan since the mid-
1950s. In the more advanced phase, seen in mature economies,nickel consump-
tion growth has tended to match that of GNP. The reason is that the pattern
of demand changes in favor of servicesusing ess metals, and in favor of
goods with high value added but relativelylowxmetalcontent (includingnickel),
e.g. computersand electronics;therefore,nickel intensitylevels off at that
stage, and then the nickel intensitywould eventuallydecline.

B. Supply Elasticities

3. No econometricstudy on nickel supply elasticitiesis available.

However, the analysisof some componentsof cost may be of particularinterest.
The componentsof cost may be divided into three main categories: operating,
depreciationand amortization(which depend on capital cost); and lastly the
normal return on capital (i.e. the opportunitycost of capital). The avail-
able data on productioncosts have been extracted from the financialstate-
ments of some of the nickel producing companies. There are inherentpitfalls
in using cost figures. Not only do they depend on the scale of production,
the grade of ore mined, and the basis for calculatingthe value of associated
by-products (traditionallythe latter are usually computedat their realized
selling price), but variations in accountingmethcds and techniquescould
also alter the outcome.

4. While nickel productionfrom sulfidesis labor-intensive,that from

laterite is relativelyenergy-intensive. About two-thirdsof the required
 February 1981 IV-3

energy is used at the mining and primary processingstage. For laterites,

energy accounts for between 40% and 60% of total operating costs, which in-
clude, besides energy, labor, material and overhead. The range relates to
the source of energy; the lower ratio tends to apply where hydroelectric
power is the main source of energy (e.g. in some operations in New Caledonia),
the higher ratio where oil is used (e.g. Dominican Republic,Philippines,
Australia and Indonesia). Until 1973, the operating productioncost of nickel
from lateriteswas about 40% more expensive than that from sulfides. The
differentialhas widened further since the hike in the price of energy in
1973.

5. The remaining part of the total operating cost is generallydivided

between labor, material and overheads in the ratio of 2.5:1:1 respectivelyfor
productionof nickel from sulfide ores and 1:1.5:1 respectivelyfor obtaining
nickel from lateriteores.

6. In addition to operating costs, capital requirementsto produce a

* ton of nickel from lateritesare generally about 70-80% higher than those for
producingnickel from sulfides.

7. Given those difficultiesand limitationsin cost estimates,an

attempt to constructa supply schedulerelating suppliesat various ranges of
unit productioncost per pound of nickel in 1976 is made (Table IV-1) using
data obtained from an Australianmineral study. 1/

C. Price DeterminationMechanisms

8. In addition to supply and demand elasticities,etc., the following

factors are of particularinterest:

1/ AustralianMineral Economies,Nickel Survey, Analysis and Outlook, 1977,

p. 29.

0
February 1981 IV-4

Table IV -1: APPROXIMATEBREAKDOWN OF WORLD/a NICKEL PRODUCTIONCAPACITY

BY UNIT PRODUCTION COST, 1976
C'0 0 0 tons per year, metal content)

Production Total Cumulative Tons

Cost /b Producer Capacity capacity Per Year
Per Pound in each (% of total)
(US cents) unit range

100 WMC(Kambalda Mines) 43

INCO (low cost mines) 120 163 25

130 Hanna (Oregon) 15 15 27

140 WMC/Shell (Windarra) 12

Dominican Republic 30
!NCO (high cost mines) 125

150 Rhodesia 15
New Caledon-a 140 155 76

160 Larco (Greece) 15

Metals Explorations (Greenvale) 20 35 81

170 Ocher Australian (Sulfide Mines) 12

Falconbridge (Canada & Norway) 45 57 90

180 Marinduque (Philippinies) 20 20 93

210 Botswana 20 20 96

Total Capacity for above 625

TOTAL WORLD CAPACITY /c 653 100

/a Excluding centrally planned economies.

/b Defined as: operating costs plus selling andA' administrative costs;

excluding depreciation, amortization and interest costs.

/c Excluding capacity in South Africa and Finland where nickel is produced

as a byproduct.

Source: Based on Australian Mineral Economics, Nickel Survey,

Analvsis and Outlook, 1977.
February 1981 IV-5

In the short run:

(i) Most of the transactionsare based on producer prices.

Given the oligopolisticstructureof the industry,INCO,
in particular, is the main price setter (detailsin sec-
tion III). The major three companies (INCO, Le Nickel
and Falconbridge)balance supply and demand. Most of the
new smaller producershave been able to produce to near
capacityduring the recent turn down of economic activi-
ties.

(ii) Nickel stocks play a major part in price determinationin

the short-run. Stocks reached as high as four times
trade requirementsin 1977/78. Interestrates fluctuated
widely in recent years and had a strong influenceon pro-
ducers' policies regarding stocks. This in turn influences
prices.

(iii) Perhaps second to the copper industry,strikes are not

unusual in the nickel industryand could last for a pro-
longed period. For example, labor strikes closed down
INCO's Canadianoperationsbetween September 1978 to June
1979.

In the long-run:

In the longer term, the shape of the industrycost curve affects

decisevelyprice trends. A few considerationson this subjectmay
be of general interest:

(i) Most of the new land based nickel mines would pro-
duce the metal from laterite ores, a significantly
dearer source.
February 1981 IV-6

(ii) A rising proportion of total supply is expected to L

come from marine sources. The cost of producing
nickel from nodules would be an important factor
in price determination.

.
February 1981 IV-7

REFERENCES

1. AustralianMineral EconomicsPty. Ltd., Nickel Survey Analysis and

Outlook, December 1977 (pp. 71-75 on elasticitiesand pp. 25-31
on cost structure).

2. Hesse, Guy C. and M. James Martin, Nickel IndustryStudy: Detailed

Quantificationof Supply - Demand Outlook, Canavest House, April
1975 (particularlythe Nickel ConsumptionModel appendix
pp. A-1 to A-7).

3. Hilmy, Joseph, "Old Nick" - An Anatomy of the Nickel Industryand its

Future, World Bank Commodity Note No. 13, 1979, pp. 34-39,
50-56 and Appendix I, pp. 62-63.

4. Kellogg, Herbert H., "Sizing up the Energy Requirementsfor Producing

Primary Materials,"Engineeringand Mining Journal, April 1977.

5. Sherritt,H. Gordon Mines, Ltd., Nickel IndustryCost Study, Canada,

February 1974.
 February 1981 V-1

V. MARKETPRICES

1. The three main producers - INCO, SLN and Palconbridge - act as

price-setters, with their posted prices closely aligned; INCO usually takes
the lead in changing the posted prices. 1/ By far, most transactions in
the market take place at such producers' prices (Tables V-1 and V-2) although
since 1974 discounts have been granted occasionally, their magnitude is not
precisely known. There is also a free market where very small amounts of
refined nickel products, mainly from Cuba and the USSR, are traded. It is
not an organized market, but price quotations attributed to it have been
published .n the Metal Bulletin since 1966. The quotations have irregular
dates and give a wide range of prices; they are reported to be based on
contracts with metal dealers but do not indicate quantities traded at such
prices. It is notable that some of the free market quotations have remainded
unchanged for prolonged periods. The INCO price for electrolytic cathodes
(99.7% nickel) FOB shipping point was selected as the benchmark price.

* 2. Pr.ces of the remaining categories of nickel are usually established

according to staple differentials. Since 1972, the prices of ferronickel,
incomet and sinter 75 have been lower than the price of nickel cathode by
about 6%, 10% and 15% respectively.

1/ A challenge to INCO's leadership took place in the early 1970s. For

example, in 1974 Falconbridge took the initiative in May of increasing
its ruling price from US$1.62 per lb. to US$1.85, and INCO followed 6
weeks later. In October 1974 SLN increased its list price to US$2.05
and Falconbridge followed quickly, but INCO delayed until December its
announced new price of US$2.01, which the others followed (notwithstand-
ing the subsequent substantial discounting from this price). Again in
September 1976 Falconbridge tried to lift the list price from US$2.20
to US$2.53 but had to fall in with the US$2.41 announced soon after
by INCO (again notwithstanding the discounting). See Australian Mineral
Economics Pty. Ltd., Nickel Survey, Analysis and Outlook, December
1977, p. 89.
February 1981 V-2

Table V-i: NICKEL - INCO'S PRICES

($/kg)

Current

1960 1.63
1961 -1.71
1962 1.76
1963 1.74
1964 1.74

1965 1.74
1966 1.74
1967 1.94
1968 2.08
1969 2.36

1970 2.85
1971 2.93
1972 3.08
1973 3.37
1974 3.83

1975 4.57
1976 4.97
1977 5.20
1978 4.61
1979 5.99
1980 7.53

Commodity Specification: Nickel - Canadian Nickel,

electrolyticcathodes,
Ni 99.97%, shippingpoint.

Source: Engineeringand Mining Journal

various issues.
February 1981 Y-3

Table V-2: OTHER NICKEL MARKET PRICES

GwCmay (FRI Uamd KAgd. Fm M Ud

N'i.sckel.
.. edi, Nwke. Ir,utnV) refinedI ton an ovea
ed Eurpe') Elnkvus Caebe)
A vgte Avenge .p
Av4,tt

RIt,DM per ILK)kg per OUl ton £pe I-by-) cogtper lb.
(1016,047 Ig)') (1016.047 kg) (451.592 pi)

t966 Z4t6,"a SOD

19040 3AM80
94? 246,000 192.5000 35.000
1918 28S,U0 205,06065 36,534
19" 334.''50 251.20109 I XO
9119 439,615 360.05833 S4,792

1MI1 524.875 434.00 54.000

1962 550,OOt 454,.0000 56,500
1963 5'9,039 482.r05 I 59,1888
19f4 584.410 486,68182 60.453
11fS 623,000 519,00000 65500

is"6 629.389 524,68421 65,165

1957 715,000 600,00000 74,000
19U '15,000 600.00000 74,00D
199 ' I 5.000 600,.0000 74,000
2960 '15,000 600,00000 74,000

1961 '18,750 630,00000 77,653

1962 722,999 649,17391 79.895
1963 '12.500 642,00000 79,000
1964 712,500 642,00000 79.1100
1965 '12,500 642,0001 78,673

1966 '25,417 652.00000 1155,33--1330,36 '78,900

1967 810,000 '37,24'711 1397.5'-1533,66 87,774
1968 870,000 902,77778 1561,78-I1659.57 95,000
1969 972,500 1007,93750 3431,41-3741,45 105,417
1970 1092,500 1210,2% 2as3,05-2247,87 128.985

1971 108-,91' 1233,649 1,23--I.34 133,000

1972 1041,00 1254,42 1,30-1.39 139,667
1973 941,00 1395,16 1,45-1,53 153,000
1974 I025,0l) 1651.44 I,93-2,07 173,500
1975 I 2Z,00 2045,42 1.80-1,93 207,333

1976 1259,50 254,99 2,02-2,14 225,250

1977 1181,42 ')3169,31 1,95--2,'2 1)240.186
1978 86.30 - 1,81-1%,96 )2,091
1979 1026,6n 280, 1 2,43-2,'1 2,715

') Until JuY 13th, l49 oiticial ruximum price; beginning July 14th, 1949price for importednickel of themajorproduces.
5) Until 1964based onqurtations publishedbe "Daid CommerctalReport", asirom 1965accordingto"Metal Bulletain".
5) Avenges basedon quotattonspubislhedbe the NletalBulletin calculatedbv us.
4) Accordingto the ItnRinceringAnd \lInine liurnil niidir.-m lJniiarv I.s. 196- Meta5ls'eek.
5) Beginning 190 £ per metricrtn.
1) Beginning 19'1 5 per lb
') January- JuR
8) Januan -Jule, December218.1)() U5-c lb.
') S Perlb.

Source: MetallgesellschaftAktiengessellschaft:Metal
Statistics,67th Edition, FrankfurtAm Main, 1980,
p. 378.
February 1981 V-4 *

3. Historically,despite large fluctuationsin the demand for nickel,

its price has shown stability,though there was a slight rise until 1967.
It is suspectedthat INCO has, without damaging itself financially,inten-
tionally kept prices low enough to prevent potential newcomers from entering
the nickel industry. Producers'prices increasedsharply over the 1967-72
period. This may have been the result of three factors: the prolonged
strike in Canada in 1967-68 and the resultant shortagesof supplies,the
fact that demand for nickel is inelasticin the short term, and the marked
rise in the cost of productionwhich took place at that time. In particular,
a new and substantiallyhigher wage contract was adopted following the strike.
It coincidedwith a surge of nickel output from la erites (a significantly
dearer source of nickel as comparedwith traditionallycheaper sulfide ores).
Since 1975, prices were artificially kept high despite large producers' stocks
and notably low operating capacity. However, discounts were commonplace.
In October 1977, INCO stopped posting prices, but quotations resumed shortly
thereafter, at a lower price, and discounts were not permitted anymore.
INCO's quotations were reintroduced shortly after. Reflecting a 10% decline
in world nickel consumption in 1980 with the ensuing rfse in inventories,
INCO announced in Ncvember 1980 a 6% discount on its prices of nickel products.
It also intends to close down its Guatemalan operations during the whole of
1981.
February 1961 V-S

REFERENCES

For historicaldevelopmentsof prices :

1. AustralianMineral Economics Pty, Ltd., Nickel Survey Analysis and

Outlook, December 1977, pp. 88-90.

2. Hesse, Guy C. and M. James Martin, Nickel IndustryStudy: Detailed

Quantificationof Supply - Demand Outlook, Canavest House, April
1975, pp. 37-39.

3. Hilmy. Joseph, "Old Nick" - An Anatomy of the Nickel Ineistryand its

Future, World Bank Commodity Note No. 13, 1979, pp. 45-50.

4. Varon, Bension, Review of the World Nickel Situation,World Bank

EconomicsDepartmentWorking Paper No. 108, 1971, pp. 6-10.

5. Varon, Bension, The Nickel Outlook Reassessed,World Bank Economics

DepartmentWorking Paper No. 135, 1972, pp. 4-8 and 13-16.

For annual reviews of prices:

Many of the mining maga7ines, particulnirly Engineering & Mining Journal,

the March issues.

For sources of pricc series:

Engineering & Mining, Jc:urnal f~'t INCO pl x. M; .[l Ci.

s
Statistics for iurnmhrof othcj l scrie,
 February 1981 VI-1

VI. SPECIAL ISSUES

A. Substitutes

1. Alternativematerials to nickel could be used either at the inter-

mediate stage - other metals can be used as alloying elements or at the end
product stage - where non-nickelbearing products may be suitable. However,
in most cases substitutionof nickel-bearingmaterial by other materials
entails a sacrificeof physical or chemical attributesand sometimes involves
an even higher cost. On the other hand, where corrosion resistance,high
strengthor special magnetic and electronicpropertiesare emphasized,carbon
steel clad with titaniumalong with plastic coating,can compete with nickel-
bearing stainlesssteel, as these substitutesprovide equal or superior
corrosion-resistant
qualities and in many instancesare relativelyinexpen-
sive. Aluminum could compete with nickel/chromiumin the automobile industry,
and in some processingindustriesaluminum and stainless could replace each

. other. In all these areas substitutionis price- and cost-sensitive. For

example, in 1967-69,when there was a shortageof nickel and its price was
high, some of these alternativealloys were commonplace. However, the amount
of nickel used in most final products representssuch an insignificantpropor-
tion of the cost of the product that nickel consumptionis not too sensitive
to its price. 1/

2. In other areas - such as the use of nickel in steel alloys and

super-alloys- manganese,molybdenum,cobalt and titanium could be used as
alternativealloying elements in various combinations. However,nickel is
often used to make these alternativea'.loys,although in smaller proportions
per unit produced.

1/ See, e.g., UNCTAD, The Effects of the Productionof Nickel from the
Seabed, with ParticularReference to the Impact on the Export Earnings
of DevelopingCountry Producers of Nickel, December 1974, p. 2.
February 1981 VI-2

3. Other areas where substitutionis possible would entail significant 0

sacrifice in performance. In nickel-basediron castings,manganese and moly-
bdenum give the most competition. The combinationof nickel/manganese/
chromiumwith steel has made a small inroad in the stainlessmarket, but the
performanceis still for nickel/chromiumstainlesson qualitativegrounds.
Indeed, the nickel content of stainless steel has been rising over the recent
decade.

B. Processing

4. The processingchain for nickel could be considered to consist of

the following steps:

stage of production output

(a) mining or (1-2% Ni)

(b) milling )ncentrates(10-15%Ni) 'raw

(c) further concentrating matte (50-75%Ni)

(d) smelting ferronickel (25-50%Ni)

(e) refining (oxidation) nickel oxides (75-90%Ni) 'processed'

(f) smelting/refining refined nickel (over 98% Ni) $

(more treatment)

It is importantto note that not all nickel mined goes through each step
shown above

5. Almost all nickel productionin the developing countries is ex-

ported. About 45% of total nickel productionor exports of developing
countries is in "processed"form; the major part is ferro-nickel(25-50%Ni)
which is directly used in steelmakingwithout further "refining". "Raw
material" nickel must be processed further to purer types - electrolytic

0
 February 1981 VI-3

cathodes,pellets, briquets and rondelles - (reachingover 98% Ni in most

cases). Almost nine tenths of developingcountries'exports in "raw material"
form are as nickel matter (50% Ni). Ores and concentratesare mostly confined
to exports of lateriteores from New Caledonia and Indonesia to feed the ferro-
nickel plants in Japan.

6. Since the early 1970s, new technologyin the steel industry has
made it possible to use nickel in the "fe Ni" state instead of pure nickel.
At present about 80% of the '$rocessednickel" produced by developingcoun-
tries is in the form of ferro-nickel,which has a low nickel content falling
below the nickel content of nickel matte. The new technologyhas a cost
advantage and is expected to raise the share of ferro-nickelin total nickel
consumptionfrom about 35% at present to cover over 50% by the end of this
decade. Most of the new nickel projects under constructionor in the pipeline
in developingcountries are for ferro-nickelproduction,because it is not
technicallyfeasible to concentratelaterite ores.

* 7. In the future, New Caledonia and Botswanawould probablybe the

only raw material nickel producers among the developingcountrieswith the
share of ferro-nickelin New Caledonia'sexports gradually rising. Similarly,
Indonesiawill be processingincreasinglymore of its output into either ferro-
nickel or refined nickel form before exporting. However, the value added by
processingnickel in matte into nickel metal is less than 15% of the value of
nickel metal.

C. Nickel from Marine Sources

8. The discovery of a vast quantity of metal-bearingnodules on the

seabed, whose mining is expected to commence in late-1980s,has added a new
dimension to prospects in the nickel market. The nodules contain mainly
manganese,nickel, copper and cobalt. The ratio of these four minerals is
significantlydifferent from the relativesize of present or likely future
February 1981 VI-4

demand for each of them. Because of this and the different land-based
reserve status of these metals, the accepted view is that the decision to
mine the nodules and the level of productionwill be determinedby the market
prospectsof nickel, whose sales are expected to yield almost 70% of gross
revenues from most of the contemplatednodule mining operations. The extent
of nodule development,therefore,will be dictatedby the outlook for an
increase in world demand for nickel 1/ and the degree of competitivenessbe-
tween marine- and land-basedsources of supply.

9. There are no definite data on the relativeproductioncosts and

profitabilityof marine- and land-minednickel. The handful of individual
firms or consortia so far engaged in pilot seabed mining projects guard
their informationclosely. Some estimates of profitability,based on confi-
dential data in which individual companies are not identified, have recently
become available. The estimate, while tentative in nature, indicates com-
petitiveness of marine nickel mining ventures with land-based laterite, but
not sulfide nickel mining operations.

10. There are a number of uncertainties regarding nodule mining at

present. Prospects for technological progress in engineering, material and
design, which would reduce production costs are uncertain. Furthermore, the
design of the particular metallurgic process selected - e.g. whetlheraddi-
tional stages of processing are included in the plant design - could determine
whether certain minerals, particularly manganese, could be recovered, thus
affecting profitability.

11. Another crucial determinant of costs and the quantity of marine-

nickel output could be the regulations to be imposed by the International

1/ In the very long run, if output from seabed mining is sufficiently large
to depress the price of nickel to the level of copper, it may open to the
former metal significant potential areas for substitution, causing a large
expansion of seabed mining. This is, however, unlikely to happen in the
1980s.
February 1981 VI-5

Seabed Authority (ISA), 1,'whose creation was proposed at the UN Conference

on the Law of the Sea. For example, proposalsare currentlyunder serious
considerationto empower the ISA to impose levies on seabed mining; to
authorizepayment of compensationto countrieswith land-basedmining whose
revenueswould be adversely affected; and to control developmentof seabed
mining. 2/ The UN Secretary-Generalhas also suggested to the Conference
that the ISA employ a grid system demarking the areas of potentialmining,
impose limitationson the number of blocks auctioned in any one year and
reserve part of the best nodule sites for future use. 3/ The most contro-
versial topic in the negotiationsregarding the Law of the Sea is the nature
of the regime of seabeds beyond national jurisdictions,the seabeds where
the nodules are found. The issue here is to what extent the private sector
and "The Enterprise"- the operating arm of the ISA - should share in the
exploitationof this new resource. Whatever internationalregulationsare
adopted, they will clearly affect the profitabilityof nodule mining, the
volume of productionand its impact on prices.

12. Within the uncertaintiesand limitationsalready mentioned, some

tentative estimatesof productioncosts were made recentlyby various

1/ See, for example,UN Third Conferenceon the Law of the Sea, Economic
Implicationsof Seabed Mineral Development in the InternationalArea,
Secretary-General'sReport, May 1974, pp. 45-59 and pp. 79-86.

2/ A proposed formula based on limitingnodule output to specificper-

centages of future nickel increases in consumptionseems to have
gained support during the deliberationsof the recent sessionsof the
UN Conferenceon the Law of the Sea. It was proposed that such
restrictionscontinue until a commodityagreement entered into effect.
The extent of the restrictionsis currentlyunder negotiation.

3/ Op. cit., UN Secretary-General's

Report, pp. 89-91.
February 1981 VI-6

sources on the relativ,eprotitabilitv of marine- versus [and-based nickel. 1/

While the estimates are wiJ&-trdr½t:l, -thc L'i indiJritOc that marinienickel mining
can compete seriously with land-based 1later-ienickei mining, but not with sul-
fide nickel operations. _/1 Lt t t esII , hwiiWvr, Jo not allow

1/ See, for exa'ple,among others:

(i) RebeccaL. Wright, Ocean Mining - An EconomicEvalution,A US Ocean
Mining Administrative Study, N'ashington D.C., May 1976, pp. 7-18.
(ii) Daniel Nyhard and a team from the Massachusetts Institute of Technology
University and the Sloan School of Management, A Cost Model of Deep
Ocean Mininp znd Associaced Regulatorn Issues, Report No. MTTSG78-4,
Office of Marine Minerals, US Department of Commerce, March 1978
(currently in preliminary draft of a special run).
(iii) UN, Economic Implications of Seabed Mineral Development in the Inter-
national Area, Op. cit., also published in the Third United Nations
Conference on the Law of the Sea - Official Records, Volume III,
pp. 29-32.
(iv) Richard Tinslev, 'Economics of Deep Ocean Resources - A question of
Manganese or No %Manganese," Mining Engineering, Societv of Mining
Engineers, April 1975, pp. 32-33.
(v) Robert Sisselman, "Ocean Miners Take Soundings on Legal Problems,
Development Alternatives," Engineering and Mining Journal,
April 1975, pp. 78-79.

2/ The estimates assume metal contents from nodules similar to those used
in this paper; capital costs ranging from 3500 million to $790 million
per mining/processing svstem providing about 3 million tons of dry nodules
per year; operating costs ranging from about $100 million in the
MIT/Sloan study to between $120-143 million in R. Wright Paper (using
the low and medium estimates 'nnthe latter paoer), all at 1975-76 prices.
On the revenue side, the prices used are broadlv r. line with IBRD
projections for the metals involved. Furthermore, taxation provisions
similar to those applicable in z.e US zn mining would provide a remunerative
rate of return on capital invested in marine mining operations.
February 1981 VI-7

for the possible decreaseof unit cost over time that might materialize
with economiesof scale, improvementin operating efficiencyand further
developmentof technology. The tentativenature of such estimatesmust,
therefore,be emphasized,and they should be viewed with great caution.

13. Current technicalcoefficientsabout nodule mining may be sum-

marized as follows:

(i) The initial generationof nodule miners will be able

to obtain 95% metallurgicalrecovery. Although nodules
vary in metal content and quality, a typical dry nodule
will include abc.t 1.6% nickel content by weight. Thus,
one million r.'trictons of dry nodules will provide about
15,000 tons of nickel (TableVI-1). 1/ This figure has
to be viewed cautiously,however. Defining what is a
typicalnodule for the purpose of projectingmarine
nickel output is difficult. The amount of nickel metal
recoverablefrom a typical dry nodule differs between
areas. 2/ In general, sources in the industrylook for
bodies containingover 1.4% nickel or over 3% combined
nickel and copper. It is not currentlyknown what
sites would be exploited at the outset, nor what re-
strictions,if any, might be imposed by the proposed
UN InternationalSeabed Authority. However, these
figures are widely accepted in the industryat pre-
sent.

Report, pp. 27-28.

1/ Op. cit., UN Secretary-General's

2/ For example,within the chemical compositionof nodules,nickel averages

between 0.16% to 2.0% in the Pacific, and between 0.31% to 0.54% in the
Atlantic, John Mero, The Mineral Resources of the Sea, 1965, p. 180.
February 1981 vI-8

Table VI-A: ESTDMATED

METAL PRODUCTIONPER MILLION METRIC TONS
OF HIGH GRADENODULES

Letal content per Metal Production

Weight of Dry per Million Tons
modules of Dry Nodules

-(percent)-- -(metric tons)-

Manganese (if recovered) 24.00 230,000

Nickel 1.60 15,000
Copper 1.40 13,000
Cobalt 0.21 2,000
Other Metals (includingmolybdenum, 0.30 2,500
vanadium,zinc and silver)

Note: Estimatesare based on various scientificdata and information

providedby geologistsand other officialsassociatedwith the
industry.

Source:LN Third Conferenceon the Law of the Sea, EconomicI=lications

of Seabed Miner-l Developmentin the InternationalArea, report
of the Secretary-General,May 1974, p. 28.
February 1981 VI-9

(ii) Optimum capacity for a mining rig will be between

one and two million tons of dry nodules annually.
However, in order to benefit from economiesof
scale at subsequentstages, most systems would
most likely be geared to processing three to four
million tons annually from two to three mining
rigs.
 February 1981 VI-lo
3

Table VI-2: NICKEL - TECHNICAL COEFFICIENTS

Nickel Content: NI content

Ores I - 22

Concentrates 10 - 152

Class I

Electrolytic Cathodes 99.91

Carboyl Pellets 99.72
Briquets
Rondels above 99%
Nickel 89

Class II

Ferronickel 40 - 50% in US,

20 - 38% outside US
Matte 50 - 75%
Nickel Oxide Sinter either 76% or 90%
Incomet 49 - 96%
Nickel Salts 20 - 25%

Price Deferentials:

Price of INCO's Electrolytic Cathodes is the Benchmark.

Ferronickel is less than Cathodes by 6%.

Incomet " 10%.
Sinter 75 " " 15%.

Weights

1 metric ton = 2204.62 lb. = 1000 kg.

1 short ton = 2000 lb. = .90718 metric ton.
1 long ton = 2240 lb. = 1.016046 It
1 kilogram (kg) = 2.2046 lb.

Marine Nodules:

Metal content per weight of dry nodules:

Manganese 24%
Nickel 1.6%
Copper 1.4%
Cobalt .21%
other meLdls
(including moly-
bdenum, vanadium,
zinc & silver) .3%

i.e. Nickel metal production per one million

tons of dry nodules = 15,000 metric tons.

Source: Summarized from previous text materiai.

February 1981 VI-li

REFERENCES

On substitutes:

1. Hesse, Guy C. and M. James Martin, Nickel Industry Study: retailed

Quantificationof Supply - Demand Outlook, Canavest House,
April 1975, pp. 23-24.

2. Mathews, Norman, Nickel, US Bureau of Mines, Departmentof the Interior,

May 1972, p. 12.

On nickel from marine sources:

1. Adams, F. Gerard, The Impact of Nickel Production from the Ocean Floor:
An EconometricAppraisal,Universityof Pennsylvania,March 1974.

2. Anacher, Ryan and Richard Sweeney, "InternationalCommodity Cartels and

the Threat of New Entry: Implicationsof Ocean Mining Resources,"
Kykles, Vol. 29, Fasc. 2, 1976.

3. Hilmy, Joseph, "Old Nick" - An Anatomy of the Nickel Industryand its

Future, World Bank CommodityNote No. 13, 1979, pp. 26-30 and
41-45.

4. Nyhard, J.D., et. al., A Cost Model of Deep Ocean Mining and Associated
RegulatoryTssues, prepared for the Office of Marine Minerals of
the US Departmentof Commerceby the MassachusettsInstituteof
Technologyand Sloan School of Management,Report No. MTTSG 78-4,
advance draft, March 1978.

5. Sisselman,Robert, "Ocean Miners Take Soundingson Legal Problems,

DevelopmentAlternatives,"Engineeringand Mining Journal, April
1975.

6. Tinsley, Richard,"Economicsof Deep Ocean Resources - A Questionof

Manganese or No Managenese,"Mining Engineering,Society of
Mining Engineers,April 1975.

7. UNCTAD, The Effects of the Productionof Nickel from the Seabed, with
ParticularReference to the Impact on the Export Earnings of
DevelopingCountry Producers of Nickel, December 1974.

8. UN Third Conferenceciithe Law of the Sea, Economic Implicationsof

Seabed Mineral Developmentin the InternationalArea, Report of
the Secretary-General,May 1974.
February 1981 VI-12

0
9. UN Third Conferenceon the Law of the Sea, Official Records, Volumes I
to VI, New York, 1975.

10. Wright, Rebecca L., Ocean Minins - An Economic Evaluation,US Ocean

Mining AdministrationStvidy,May 1976.