Australian mining giant BHP said Monday that up to 60% of the Australian nickel industry is struggling to make ends meet at the current market prices, Kallanish reports.

Speaking in a shareholder Q&A session, chief financial officer David Lamont said: “30% of the Australian nickel market today has gone offline and another 30% is also under pressure alongside the cash scenario.”

According to chief executive Mike Henry, the company’s nickel production costs currently sit at about $20,000/tonne, but market prices dropped to $16,000-17,000/t. “So just from an operating cost or operating margin basis, we’re in the red. That means that the business is losing cash, and at the same time, there’s a need for ongoing investment in the business just to keep it safe and running effectively,” he says. “So looking at all of that, we’ve said okay, well clearly this isn’t sustainable”

The picture painted by the executives reflected shareholders’ queries on the sustainability of BHP’s nickel division (Nickel West) amid the industry downturn. In its half-year results, BHP said it booked a $2.5 billion impairment due to the current nickel price slump and is now working to preserve its cash.

As part of that measure, Lamont confirmed changes to the West Musgrave nickel-copper project it is building in Western Australia and a “sense of urgency” to complete the review on whether to put Nickel West under care and maintenance. The firm had previously said it was reviewing the mine’s development timeline, and has now confirmed it has cut around a quarter of the contractor workforce at the West Musgrave site. First production was expected in H2 2025.

To put Nickel West offline until conditions improve is a “technically challenging task” and a “pretty weighty decision,” Henry explains. That’s because, in addition to the mine, the operation also involves smelters and the refinery, as well as 3,000 employees.

“We do recognise that the current situation provides a degree of significant uncertainty for people … we are very committed to working through all of these considerations and coming to a landing on the decision as soon as quickly practical,” he adds.

Moreover, the executives also suggested that Australia has a long way to go to ensure a competitive landscape due to a high taxing regime. The country has one of the highest corporate taxes in the world, with royalty rates varying widely across states. In Queensland, for instance, the royalty stands at 62%, according to Lamont.

Henry also says the average mining wages in Australia are 12-15% higher than in Canada and the US, and that recent policies on migration skills are impacting the company. While noting “positive government steps” in the country, Henry says these are “in pockets.” Constructive engagements are seen particularly in Western Australia and South Australia, but not on a federal level, he concludes.