The plunging price of nickel has claimed a major victim. Xstrata Nickel announced Tuesday morning that it is shutting down its Falcondo nickel operations in the Dominican Republic because of "difficult market conditions." In other words, high oil prices and low nickel prices.

It was just last year that nickel soared to an absurd high of about US$25.00 a pound. But since then, it has plunged back below US$10.00 as the high prices cut demand for stainless steel, nickel's main use.

With prices down so much, analysts have speculated that some mines could be shut down. The ones that are most vulnerable are the "laterite" mines, which are higher-cost than the "sulphide" mines because the ore is more difficult to extract.

Falcondo is a laterite operation. The project is expected to be shut for four months as Xstrata conducts maintenance activities and works on an energy conversion plan to switch the project's power source from oil to coal.

A number of other nickel laterite operations are expected to come onstream in the next few years, including Vale Inco's Goro mine, Xstrata Nickel's Koniambo mine, and the Ambatovy mine, which is owned by a syndicate that includes Canada's Sherritt International Corp.

Peter Koven