ECONOMY-CUBA: Nickel Production Up Despite Price Fall

By Patricia Grogg Reprint | | Print |

Patricia Grogg

HAVANA, Feb 8 1999 (IPS) - Cuba will continue boosting the output of nickel this year, despite the fact prices for the mineral in international markets remain low because of the current financial crisis, government officials said here.

The island has known reserves of about 800 million tons of nickel, which puts Cuba among the main producers in the world. The mineral is also the third most important source of foreign revenues for Cuba, after tourism and sugar.

Nickel production dropped off in the early 1990s and in 1994 reached only 46,000 tons — half that of 1989.

According to analysts, the sharp drop in the price of nickel had cost Cuba about 70 million dollars in annual income for the national economy. Prices slumped from a high of 9,000 dollars at the end of the last decade to around 3,500 dollars a ton in 1998.

In a report on the current status and perspectives for the economy, Minister of Economics and Planning Jose Luis Rodriguez said that the competitiveness of nickel production was being maintained thanks to the high level of efficiency in the extraction process and primary production.

Rodriguez said that low prices had not led to plant closings in the nickel industry, nor to the reduction in production, which last year reached 68,000 tons and, according to predictions, would rise to 73,000 tons in 1999.

At the beginning of the current decade, the collapse of the Soviet Union and European socialist regimes left the Cuban nickel industry without buyers or suppliers of raw materials and spare parts.

It destroyed hopes of reaching a nickel output of 70,000 tons at the beginning of the 1990s, a target which was supposed to be achieved thanks to a development project with socialist partners from Eastern Europe for the construction of two processing plants with a capacity for 30,000 tons each.

Then followed an agonizing hiatus, and in 1994 the island’s three industrial centers, located in northeastern Holguin – 771 kilometers east of Havana – barely produced 26,772 tons.

Salvation came from Canada, the only country in the Americas – together with Mexico – that maintained diplomatic relations with Fidel Castro’s Cuba, giving it a “special” status in Havana’s eyes.

At the end of 1994, the Canadian consortium Sherrit Inc. and the Cuban General Nickel Company S.A. agreed to form a mixed venture with a capital of 500 million dollars and two concessions for mineral exploitation for 25 years each.

The agreement includes the Pedro Soto Alba processing plant, in Moa (Holguin), and a refinery in Canada, and a marketing system as well. That way, it satisfies the three main shortcomings that led Cuba to seek foreign investment: capital, technology and market.

Toward the end of 1995, Moa Nickel S.A. managed to increase its yield from 12,500 to 20,000 tons. Together with Che Guevara and Rene Ramos Latour Industries, global increase in production surpassed 43,000 tons.

Industry analysts said the key to this success was the influx of fresh capital, which facilitated investments to begin a program of modernization of the plants and thus improve technological and economic efficiency.

They also pointed to new systems of entrepreneurial management that offer the possibility of decentralization and self- management, in addition to salary incentives for improved results in labor.

Cuba’s open-cast nickel mines have the advantage of lower production costs but financial circles hold that the way things are now in terms of prices, “nickel is not good business” at present.

Hoping for better circumstances, optimists prefer to speak of the perspectives offered by a closed contract made two or three years ago with an Australian firm, estimated in about 600 million dollars.

This joint venture agreement for the exploration and development of a deposit in Pinares del Mayari Oeste (also in Holguin) involves the Australian Western Mining Corporation Holding Limited and the Commercial Caribbean Nickel S.A.

The contract includes the possibility of building the first refinery on Cuban soil but this apparently is a long way from fruition. Also in an early stage of negotiations is a contract with a South African subsidiary for the exploration and development of a mine in the central-western city of Camaguey.

According to government sources , Cuba aspires to conclude the modernization of this strategic industry in the year 2000, which would allow it to compete in costs and quality, ensure markets, and reach annual production levels of more than 75,000 tons of nickel plus cobalt.