Never before has the business world felt so vulnerable to other countries' economies and yet this is the situation as global nickel demand has come to a grinding halt.
John Fera, United Steelworkers president of Sudbury's Local 6500 said production price is not the cause. The problem is no one is buying nickel, not even China or India.
“Everyone in the world has stopped buying,” said the head of the largest union at Vale Inco.
“The market has dried up. All the projects that were on the table for China and India have been put on hold.”
Likewise, all the mine development projects are postponed indefinitely. As a result, Vale Inco is one of the many global miners making cuts to their 2009 budget and adjustments in their operations.
Sudbury's Copper Cliff South mine (CC South) will be shutdown and operations suspended starting January onwards. The CC South output contributes to the production of 8,000 metric tons per year of finished nickel.
Newfoundland and Labrador's Voisey’s Bay operations in Canada, which comprise of the Ovoid mine and a processing mill, will be shutdown during the entire month of July 2009. Voisey’s Bay produces nickel and copper concentrates. In the first nine months of 2008, its operations contributed to the production of 58,000-metric tons of finished nickel and 39,000-metric tons of copper in concentrate.
Vale has also decided to postpone the start up of the new US$ 814 million Copper Cliff Deep (CC Deep) project for 12 months. The company set aside US $138 million in their 2009 budget to replace shafts in the Copper Cliff North and South mines into one single shaft.
Vale is also launching an international voluntary retirement program for eligible staff employees.
“We have not acted in haste,” said Cory McPhee, corporate affairs director for Vale.
“This is a delicate situation.”
A comprehensive review of the nickel operations around the world has been done and the only way to reduce overhead with minimal impact was to shut down certain operations and implement an early retirement package, he said.
Approximately 350 Vale workers, most living in Sudbury, are eligible for early retirement and will notify the company with their intentions by Dec 15.
Fera was at the Sudbury operations to speak with the crew on the day of the Dec. 4 announcement. The word from the company was that there will be no layoffs and thus no incentives to pensions for hourly rate people.
Approximately 260 of his workers will be relocated to other locations in Sudbury along with another 60 to 70 unionized and non-unionized staff.
Only month ago Vale was on a 1,000 to 1,500 job hiring spree alongside neighbour Xstrata Nickel, until market conditions soured.
It is a sign of the times, McPhee said.
“Who would have thought the big three auto makers may be going bankrupt. We have to be responsible operators of the business and preserve the health and competitiveness today and for the long-term future.”
Projects like the Copper Cliff Deep have impacted the mining service and supply companies including mine builders Cementation Canada, who have been contracted with 100 men to sink the shaft at the Copper Cliff North and South mine.
More contracts have been terminated where future projects are concerned, McPhee said.
“We absolutely understand the impact this has on the Sudbury economy.”
For now, this is waiting game. McPhee would not comment if more cuts are expected but only said the announcements were indicative of the market reality.
Sudbury Area Service and Supply Association (SAMSSA) president Dick DeStefano said it was naive to think Sudbury would not be affected by softening nickel demands.
The company follows suite with numerous other miners including neighbour Xstrata Nickel and FNX Mining Co. A month ago Xstrata announced shut downs at their Thayer Lindsley and Craig Mines along with early retirement programs following the shutdown of FNX's Levack Mine.
Fera said people in the mining world are wondering “what is happening here?”
One day it is business as usual in a healthy economy and the next day people are scurrying to save assets.
“Everybody is sitting at the edge of their seat. No one wants to jump and no one wants to lay back. Everyone wants to make sure that when this cycle starts up again they are ready.”
The plan for many is to wait out the dry spell and be ready for a quick turnaround when the global economy begins to pick back up.
“The whole world has to start ramping up again not in competition, but in cooperation, he said, because the markets have become so global that when one market sneezes the other feels it.”