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Vale running out of cash as nickel price continues to slide
The price of nickel, which has been suffering a ongoing decline in global metal markets, has negatively affected the cash flow of publicly listed nickel producer PT Vale Indonesia
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T
he price of nickel, which has been suffering a ongoing decline in global metal markets, has negatively affected the cash flow of publicly listed nickel producer PT Vale Indonesia. If this situation continues for much longer, the company may have negative cash flow through the end of this year.
So said Vale Indonesia president director Nicolaas Kanter during a meeting with South Sulawesi Governor Syahrul Yasin Limpo in the province's capital, Makassar, on Friday.
Nicolaas, who is commonly known as Nico, said that nickel was currently priced at between Rp 13,000 (US$1.3) and Rp 14,000 per kilogram in the global markets.
'Initially, we hoped that nickel prices would improve. During the last two weeks, however, the price has declined to Rp 13,000 per kg. It means that Vale's cash flow will be minus at the end of this year,' he said.
The drop in the nickel price in global markets has been triggered by the European financial crisis. Furthermore, China, as one of the largest markets for nickel, is currently experiencing an oversupply, causing less demand for nickel.
This year, Vale Indonesia, which manages nickel mines in Sorowako, East Luwu regency, South Sulawesi, is targeting to produce 79,500 metric tons of nickel ore. Nico said the company would fulfill its production target despite a sharp drop in the price of nickel.
During the meeting, Nico also asked the South Sulawesi governor to help mediate the renegotiation of Vale Indonesia's mineral mining contracts with the central government.
According to Nico, Vale CEO Murilo Ferreira stated that Vale would not inject $2 billion of further investment in the company until the renegotiation of the mining contracts was completed. (ebf)
