Vale Says Sudbury to Resume Nickel Production Today Amid Strike

By Diana Kinch

Oct. 1 (Bloomberg) -- Vale SA, the world’s second-biggest nickel producer, said it will restart partial production today at Sudbury, its largest nickel unit in Canada, amid a strike.

The company will operate its Clarabelle processing mill at Sudbury for an initial 48-hour period starting today, Cory McPhee, Toronto-based spokesman with Vale Inco Ltd., said yesterday in an e-mailed statement. Preparatory work continues at Sudbury mines Coleman and Garson Ramp, where the company expects to restart output early next week, he said.

About 3,300 of almost 4,600 employees at Sudbury walked off the job on July 13 after talks broke down over a labor contract, leading to the longest strike in Vale’s 67-year history. Output was paralyzed and customers were supplied by stockpiles.

“We are ready to resume partial production,” McPhee said. “Although we would prefer to be operating normally, the resumption of partial production is a matter of doing what’s best for the business.”

Earlier this month Vale said it would restart Sudbury by retraining staff members who hadn’t joined the strike. The restart will provide employment for 1,200 Sudbury workers, McPhee said. No talks are planned for Sudbury strikers, he said.

Most installations at Sudbury, which also produces copper, have been at a standstill since May 1, when Vale reduced output because of low market demand. This was followed by a maintenance shutdown in June and July before the strike erupted.

Vale’s Sudbury restart may cause nickel prices to fall, according to Paul Gray, a London-based analyst with Goldman Sachs JBWere.

Too Much Nickel

Nickel will remain in oversupply for the foreseeable future and may hit an average of $6.50 a pound in 2010 “significantly lower than current cash prices,” Gray said at a conference in Belo Horizonte on Sept. 22. “Demand has suffered hugely because of lower stainless steel demand this year.”

Prices of nickel, mainly used in stainless steel, may not recover to their 2006 levels until 2012, the analyst said.

Output at another Vale nickel mine in Canada, Voisey’s Bay, remains halted because of a strike. Voisey’s Bay has the capacity to produce 50,000 metric tons a year of nickel concentrate.

The unit hasn’t produced since the third week of June when it started maintenance work before the strike, Tom Paddon, a Voisey’s Bay general manager, said in an interview on Sept. 22.

Voisey’s Bay

About 200 of the 500 employees at Voisey’s Bay are on strike, he said.

Vale stopped operations at Thompson on Aug. 1, the same day a strike halted its Voisey’s Bay plant in Newfoundland.

OAO GMK Norilsk Nickel is the world’s largest nickel producer. About 75 percent of Vale’s nickel production comes from Canada.

Vale rose 0.2 percent to 36.60 reais in Sao Paulo trading yesterday. The stock has gained 12 percent in the past year, half the 24 percent increase for Brazil’s benchmark Bovespa index.

To contact the reporter on this story: Diana Kinch in Rio de Janeiro at dkinch1@bloomberg.net