The Ambatovy operation is located in the east of Madagascar and uses hydrometallurgical processes to convert laterite ore from the Ambatovy mine into nickel and cobalt briquettes with a purity of 99.8% minimum.

Damage to the plant was confirmed by Sumitomo Corp to have taken place on 25 September with the cause unknown. Further assessment will provide insight as to how long the outage could last. Only recently, Sumitomo filed a restructuring plan for the Madagascan operation, for which it owns a 54.2% stake.

The development marks the latest challenge for Ambatovy. Earlier in 2024, guidance was reduced due to system glitches. The company has endured a chequered history since starting in 2012, and production levels have never reached close to nameplate capacity. During construction, the project also experienced massive capital overruns with an initial capital cost estimate of US$3.3Bn, which ballooned to US$8.5Bn. Plant redesign and reconfiguration have been one of the fundamental causes of rising capital costs. Meanwhile, most of the operational difficulties have been at the processing plant and refinery which has struggled to handle the variability of mined ore grades and mixed mineralogy.

For nickel, a prolonged outage would further reduce the availability of nickel briquettes to the market, following BHP’s decision to place its entire Australian Nickel West operations on care and maintenance on 1 October. The remaining producers are Nornickel Harjavalta, Glencore’s Murrin Murrin, Impala Platinum and Sherritt. However, there is much reduced demand from China for briquettes for use in nickel sulphate production in light of the influx of mixed hydroxide precipitate (MHP) from Indonesia and its use in stainless steel production.

From a cobalt perspective, some cobalt briquettes from Ambatovy are shipped to the European market. However, the current halt in production is not a concern for cobalt supply, particularly given the ongoing decline in cobalt metal prices and the availability of other sources. For instance, in H1 2024, trade data indicated an increase in Chinese cobalt metal exports to Europe, while LME reported a rise in off-warrant stockpiled cobalt metal.

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