Nickel Production Halted at Ambatovy Plant Following Pipeline Damage

Operational Halt Due to Slurry Pipeline Damage

The Ambatovy nickel and cobalt production facility in Madagascar has suspended operations following significant damage to its slurry pipeline. This Ambatovy production halt resulted from the pipeline damage. The pipeline, critical for transporting ore from the mine to the refinery, was damaged on September 25, causing an ore discharge that led to the immediate shutdown of production. Sumitomo, the plant’s majority owner, reported that no injuries occurred during the incident. However, the cause of the damage is under investigation, and the future of the plant remains uncertain due to rising production costs and ongoing market challenges.

Financial Strain and Market Disruptions

Ambatovy’s halt is especially troubling given its role as one of the last active producers of nickel briquettes, a vital form of refined nickel. The global nickel market has experienced disruptions, with BHP halting briquette production and Norilsk Nickel resuming output. Despite Norilsk’s return, Ambatovy’s high production costs continue to raise concerns. Sources indicate that Ambatovy’s costs are significantly higher than the current market price—by as much as $10,000 per tonne—suggesting that Sumitomo faces growing financial losses. This Ambatovy production halt further exacerbates these financial concerns.

Debt Restructuring and Declining Production Rates

Sumitomo’s financial troubles extend beyond the plant’s operational difficulties. The company filed a debt restructuring plan in London, struggling under falling nickel prices and increasing operational inefficiencies. Production at Ambatovy decreased by 20% in the second quarter, with output dropping to just 8,000 tonnes compared to the previous year. The recent suspension adds further uncertainty, casting doubt on the plant’s future operations and its ability to recover from the mounting economic challenges associated with the Ambatovy production halt.