BHP (ASX, LON, NYSE: BHP) is halting its Western Australia nickel operations starting in October, as the world’s largest miner struggles to navigate challenges posed by a substantial decline in nickel prices and a global oversupply.

The mining giant, which had warned the market about this potential outcome earlier this year, said it will review its decision affecting both the Nickel West operations and the West Musgrave project by February 2027.

“Like others in the Australian nickel sector, we have not been able to overcome the substantial economic challenges driven by a global oversupply of nickel,” BHP Australia president, Geraldine Slattery, said.

BHP noted it would offer redeployment opportunities to the company’s other operations or a redundancy payout to the 2,500 employees in the division.

The company will establish a A$20 million ($13.6m) community fund to support local communities and business impacted by the suspension.

Resources Minister Madeleine King called the decision “disappointing”, noting that the federal government had worked with BHP and the broader nickel sector on policy responses to support ongoing Australian nickel production.

“We added nickel to the critical minerals list in February, making nickel projects eligible for consideration under the A$4 billion critical minerals facility,” King said in a statement.

Prices for nickel, a crucial metal for electric vehicle (EV) batteries, dropped 40% last year and have continued to experience declines in the past weeks. 

Experts, including Macquarie Financial Services, say prices have likely hit a floor mainly due to the growing amount of the metal coming from top producer Indonesia. This oversupply has pushed the industry into a critical situation, as half of all nickel mines are unable to turn a profit at current prices.

BHP has also increased its non-cash impairment by $300 million to the $3.5 billion impairment charge against the carrying value of the business, which it announced in February.

Source: MINING.COM