Brazil's Vale Aims to Become Biggest Nickel Producer

RIO DE JANEIRO, Oct 19 -- (Adds short supply seen in nickel market, balance between nickel sulphides and laterite projects).

Brazil's Vale SA (VALE, VALE5.BR), the world's biggest iron ore producer, is aiming also to become the world's biggest nickel producer, overtaking Norilsk Nickel Mining & Metallurgical Co. (NILSY, GMKN.RS), a Vale executive said Monday.

Vale aims to have a 20% share in the world nickel market, base metals executive director Tito Martins said Monday. This would boost the company's pricing power in the market. Martins sees the market moving into short supply because of recovering demand for stainless steel, for which nickel is one of the main raw materials.

Vale's aim is to boost its nickel metal output to 400,000 metric tons a year, Martins said during a meeting with investors in New York. In 2008, before Vale suffered a year-long strike at some of its Canadian nickel operations, Vale's finished nickel output accounted for 17.4% of the world's total, compared with a 20.6% share held by Norilsk Nickel, Martins said.

Vale will boost its nickel output by bringing on several new projects, the director said. Vale New Caledonia, also known as the Goro project, is now ramping up its output, which will eventually reach full capacity of 60,000 tons a year. Onca Puma, a ferro-nickel project in north Brazil, will start up within a few weeks and should start commercial production early in 2011, Martins said. Onca Puma is planned to have a capacity of 58,000 tons a year of nickel contained in ferro nickel.

Vale is also building a 50,000-tons-a-year nickel refinery at Long Harbor in Canada, due to start up in 2013. The company plans to reduce its Canada nickel operating costs by 5% by 2015 from 2009 levels, Martins said.

"Vale's nickel reserves are 7.9 million tons, which are larger than Norilsk's 6.4 million tons," Martins said. "If it hadn't been for the strike in Canada, we might already be producing more than Norilsk."

Vale's nickel portfolio shows a balance between lower-cost nickel sulphides projects and nickel laterite projects, which tend to be higher-cost, Martins said. Most of the world's unexplored nickel deposits are now of the laterite type.