Cuba May Cut Nickel Production

Cuba may soon join a growing list of countries shutting down nickel plants in the face of slumping prices, sources close to the industry said this week, in the latest indication the international economic crisis has begun to bite.

Unrefined nickel and cobalt production at two state-run processing plants are under review due to their inefficiencies.

"With prices below $10,000 per tonne and an average 117 barrels of fuel oil needed to produce a tonne for market, it is only logical they would be considering cutting back," a foreign businessman said Tuesday, asking his name not be used.

Cutbacks are being considered at two state run plants.

A third plant run as a joint venture with Canada's Sherritt International (S.TO) consumes around 35 barrels of oil per tonne of output and plans to produce around 33,000 tonnes this year are unchanged, according to industry sources.

State-run television's top economic commentator, Ariel Terrero, said last week that the international economic crisis was hitting the nickel industry hard, with little prospect for improvement in the short term.

"Evidently we will have to take measures. They are studying the best way to adjust production in the face of low prices on the international market," he said.

The Caribbean island is one of the world's largest nickel producers at 70,400 tonnes in 2008, and supplies 10 percent of the world's cobalt, according to Cuba's Basic Industry Ministry.

Nickel is essential in the production of stainless steel and other corrosion-resistant alloys, while cobalt is critical for making super alloys used in aircraft engines and other products.

Nickel has accounted for more than 50 percent of export earnings in recent years, not including services.

Since the United States established a commission in 2006 to track Cuban nickel as part of sanctions, information on the sector has been restricted.

Cuban nickel is considered to be Class II with an average 90 percent nickel content.

Cuba's National Minerals Resource Center has reported that eastern Holguin province has 34 percent of the world's known reserves, or some 800 million tonnes, of proven nickel plus cobalt reserves.

The center says the region holds an additional 2.2 billion tonnes of probable reserves, with lesser reserves in other parts of the country.

Source: Reuters