Friday, December 29, 2006

Nickel still number one for Cuba

Nickel still number one for Cuba
Patricia Grogg

HAVANA, Cuba, December 29, 2006 - Nickel retained its first place among
Cuban exports in 2006, its earnings boosted by unprecedented high prices
on the international market, although output was lower than the
government had hoped.

Over the past year, the price of nickel ore rose by 157 percent to
today's market value of more than 30,000 dollars a ton. On Dec. 15, it
was quoted at 34,800 dollars a ton on the London market.

However, experts are now warning that the predicted slow-down in the
U.S. economy in 2007, and a temporary oversupply of nickel on the global
market, may bring nickel prices down in the near future.

Nickel has been Cuba's top traditional export product since 2000, and in
2005 it was once again the country's top source of foreign exchange,
along with services and the biotechnology sector.

However, Canadian firm Sherritt International announced an estimated
shortfall of 3,000 tons at an ore-processing plant it operates in
partnership with Cuba. This means that the national production target of
76,700 tons for this year, a modest increase over production in 2005, is
unlikely to be met.

The Cuban-Canadian joint venture Moa-Níquel (formerly Pedro Soto Alba)
S.A. said in its report for the first quarter of 2006 that it would have
to readjust its planned output target of 33,000 tons for 2006 downwards
to 30,000 tons, because of bottlenecks in the production process,
apparently in the first quarter.

"So far, strong prices have compensated for the decline in production,"
a Cuban researcher who wished to remain anonymous told IPS. Total Cuban
nickel production in 2005 amounted to 75,900 tons, similar to output for
2004, and a very modest increment of 1..1 percent was planned for 2006.
Given the upward trend in international prices, which crossed the 20,000
dollar a ton mark in 2000, the Cuban government designed an ambitious
plan for a gradual increase in production.

Last year, Cuba reached an agreement with Sherritt International for
expanding production at the Moa-Níquel plant, and incorporating the
latest technology at a Canadian cobalt-nickel refinery, financed with
more than 500 million dollars contributed equally by both partners.

The expansion of the Moa-Níquel plant was intended to increase output by
16,000 tons year, or about 50 percent, by the end of 2008.

But Sherritt itself has now announced that the plans to increase
Moa-Níquel's capacity will have to be reviewed, and are now forecasting
staged production increases of 4,000 tons for 2008, 9,000 tons in 2009,
and a further 3,000 tons by 2011.

The Cuban-Canadian joint venture owns the processing plant at Moa, in
the eastern Cuban province of Holguín, a refining facility at Fort
Saskatchewan, in the western Canadian province of Alberta, and a trading
corporation in the Bahamas.

Two other nickel processing plants, the René Ramos Latour and the
Ernesto Che Guevara facilities, operated at full capacity in 2005,
according to informed sources consulted by IPS. They are both owned and
operated by the Cuban state Unión del Níquel company.

Cuba has substantial nickel and cobalt reserves located in Moa and
Nicaro, in the province of Holguín.

Proven nickel reserves are estimated at 800 million metric tons, and
probable reserves at two billion tons. Cuba's cobalt reserves,
meanwhile, account for approximately 26 percent of the world's total

Official statistics indicate that the island's processing capacity is
about 70,000 tons a year, including all three processing plants.

Expansion plans for the industry include building a ferronickel plant, a
compound of iron and nickel used almost entirely in the manufacture of
stainless steel. The plant will be built jointly with China, according
to an agreement signed in 2005 during Chinese President Hu Jintao's
state visit to Havana.

The ferronickel factory, also to be located in Moa, is expected to
produce 68,000 tons a year of iron-nickel alloy. Conceived as a joint
venture, Cuba will own 51 percent of the shares and the Chinese
Minmetals group the remaining 49 percent.

There are plans for China to invest in a fifth processing plant, to be
built close to the ore reserves at San Felipe in the eastern province of
Camaguay, which would increase Cuban nickel production to 120,000 tons a
year (up from its current 76,000 tons) in the future.

China is to invest over one billion dollars in the Cuban-Chinese San
Felipe project, according to the agreements signed by Cuban President
Fidel Castro and President Hu in Havana.

Without going into details, Venezuelan President Hugo Chávez said in
Caracas on Dec. 14 that Venezuela and Cuba are planning to manufacture
stainless steel with Cuban nickel and Venezuelan iron.

At present, it is estimated that China absorbs half of Cuba's total
nickel output, and would be capable of buying up the other 50 percent,
according to experts, because China is the world's top producer of
steel, and its industry is still expanding.

Experts concur that until the day when oil starts gushing from the
underwater reserves in the Cuban zone of the Gulf of Mexico -- China is
also involved in oil exploration there -- nickel is important as
collateral for the loans Beijing has given Havana in recent years.

China is now Cuba's second largest trading partner, after Venezuela.
Trade between Cuba and China was worth more than one billion dollars in
2006, and the Asian giant is providing the Caribbean country with large
amounts of soft credit.

According to the U.S. Geological Survey, world nickel production stood
at 1.5 million tons in 2005.

Russia, the United States, Canada, Australia, Norway and Cuba are the
world's foremost producers of nickel, a non-ferrous metal used in a
large number of industrial processes.

Stainless steel manufacturing uses about 60 percent of the total
production of nickel, which is also employed in the chemical,
petrochemical, electronic, aerospace and automobile industries. (IPS)

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