[ferro-alloys.com]2018 was particularly difficult in terms of productivity for Nickel activity given the disrupted social and societal context in New Caledonia, and an underperforming Sandouville plant.

Sales amounted to €738m, up 15% versus 2017, and the BU’s current operating income was -€111m. SLN posted a COI of -€64m, up sharply (+€31m), driven mainly by the rise in nickel prices and growth in exported ore volumes. The Sandouville plant’s performance once again weighed heavily on results, with a loss of €57m.

Global stainless steel production increased by 4.8% in 2018 compared to 2017. It remained generally robust over the year, with, however, a sharp increase in H1 (+9.7 % compared to H1 2017) and a stable H2 (+0.4%). Production in China indeed declined -0.5 % in H2 due to a slowdown in the automotive and construction sectors, offset by strong growth of integrated producers in Indonesia, whose volumes increased threefold between 2017 and 2018.

Demand for primary nickel was up 3.4 % over the period, boosted by both stainless steel and the good outlook offered by the development of the electric vehicle battery sector, which grew by 62% in 2018 (to 135 kt of primary nickel).

Global primary nickel production was also up 5.3% in 2018 versus 2017, driven by continued growth in NPI (″nickel pig iron″) particularly in Indonesia.

However, this production increase was not enough to meet the change in demand, and the nickel supply/demand balance remains in deficit in 2018, as in 2017, with a deficit of more than 100 kt of nickel. Therefore, nickel stocks on the LME and SHFE declined steadily and sharply throughout the year to 222 kt at end-December 2018 (-46% from end-December 2017).

The average LME price increased by 26% in 2018 to USD 5.95/lb (USD 13,118/t), versus an average of USD 4.72/lb (USD 10,407/t) in 2017. Following a sharp increase in H1, the threat of tensions in international trade weighed on growth prospects in H2, particularly in China, adversely impacting prices.

The latter were also supported by the weakened dollar price during the year.

In New Caledonia, the blockade of the Kouaoua mining centre between August and October generated an impact on the Group's current operating income of €11m for the 2018 financial year.

Thanks to solid mining production (excluding Kouaoua), SLN nonetheless achieved a record level of 1.2 Mt of exported ore in 2018, +36% year-to-date. Exported ore is lower-grade in nickel and cannot be used for local metallurgical production.

Metallurgical nickel production at Doniambo was down 4% in 2018 versus 2017, while ferronickel sales volumes remained stable, ending at 55.3 kt.

SLN’s cash-cost at real economic conditions stood at USD 5.7 /lb at H2 2018 and USD 5.8/lb in 2018, largely penalised by changes in the Euro/US dollar exchange rate, the rise in the price of fuel oil, and difficulties in mining operations. The breakeven cost ended at USD 6.5 /lb in 2018.

Faced with these internal and external challenges, a rescue plan for SLN was defined at end-2018. Its success depends on the commitment of all stakeholders in the first few months of 2019, with a tight schedule. The plan is based on the effective implementation of a new business model, including an increase of exported ore quantities, on progress in improving internal performance, and on the short term

reduction in energy prices.

The new business model is rebalanced on two activities, mining and metallurgy. It will allow to increase the company’s revenue through improved valuation in its current mining deposits and reduce cash-cost accordingly. The success of this model is based on a target volume of 4 Mt ore exported, on an annual basis, with achievement of this pace as of H2 2020. The latter is subject to obtaining authorisations for

new export applications, which will be submitted during Q1 2019. SLN is targeting 1.5 Mt in ore exports as of 2019.

The rescue plan is targeting an intrinsic improvement in cash-cost of USD 1.30 /lb by 2021.

Implementation is key, without which the loans granted by Eramet and the French government will run out in 2020 in current market conditions. To achieve this, SLN is in constant dialogue with all concerned stakeholders, particularly local authorities and social partners.

After the annual mid-year shutdown for major maintenance work, the Sandouville plant's activity restarted slowly, rising from a 20 to 60% operating rate in 2018. Operating performance has not, however, achieved breakeven cash to date, and in doing so, the plant has added further losses. Technical reinforcements have been assigned to Sandouville and the Group is making every effort to deliver significant progress, targeting an operating rate of 80% to achieve breakeven.

In Indonesia, the implementation of the Weda Bay Nickel project resulted in the start of construction work of the NPI (nickel pig iron) production plant. The first tonnes produced are expected at end-2020 with a long-term production capacity of 30 kt of NPI, and an off-take of 43% for Eramet.

(Eramet official)

• [Editor:王可]