Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Shares in French mining group Eramet tumbled 19 per cent on Wednesday as the company announced cuts to production targets for nickel and manganese.
It is another blow to the Paris-listed group, which has suffered from the collapse in the nickel market.
The market has been affected by the rapid increase in the production of the metal at low cost in Indonesia, largely by companies owned by China-based groups, which has resulted in a glut and driven down prices sharply.
Eramet shares have plummeted about 50 per cent since June, mainly hit by the falling price of nickel, which has slumped to about $17,395 per tonne, from more than $30,000 at the end of 2022.
The company’s latest share fall was prompted by cuts to its production targets at a manganese site in Gabon and its nickel operations in Indonesia. The stock dropped to €53.55 at one point, a 19 per cent decline, although the losses were pared back to €58.05, a 12 per cent drop, by mid-afternoon in Paris.
The group was hit by a smaller than expected permit allowance for mining nickel in Indonesia. Eramet said on Tuesday night that the Indonesian government had given it an operating and sales permit that was “well short” of what it had hoped to be allocated for 2024.
The company also flagged a smaller production estimate for manganese ore, which is used in carbon steel production, a sector hit in turn by falling Chinese demand.
The fall in nickel prices has prompted companies including First Quantum and BHP to suspend production at certain mines.
This year, Swiss mining house Glencore also announced plans to sell its stake in a nickel mine in New Caledonia.
Eramet’s chief executive Christel Bories told the Financial Times in February that the trend could end up completely wiping out parts of the industry and mines outside Indonesia.
The French group has operations in Indonesia’s Weda Bay, the world’s largest nickel mine, and its presence there has helped it offset difficulties at its mine in the French territory of New Caledonia, where it has suffered stoppages and losses.
Analysts at BMO said the shortage of permits being issued by the Indonesian government was “creating significant tightness” in the market. They pointed out that Chinese nickel group Tsingshan, Eramet’s partner in Indonesia, had also recently announced production cuts.
Shortage of nickel ore, or the rocks that contain nickel that are processed to make the metal, were “increasingly” leading to imports of ore from the Philippines, they added.
Analysts at Bank of America said Eramet remained at the mercy of “the broad macro moves in Chinese steel for manganese and to Indonesian policy decisions for nickel”.