SunSirs: Sumitomo's Nickel-Cobalt Project Shutdown Is a Positive Factor for the Market

Sumitomo Corporation of Japan announced on February 18 that its Ambatovi nickel-cobalt project in Madagascar was shut down due to damage to facilities caused by Tropical Cyclone Gaizani that struck the island last week. In a statement, the company said that operations were immediately suspended once signs of an approaching cyclone became apparent, with safety being the top priority. The report added that a detailed assessment of the extent of the damage, including the condition of equipment, and its impact on revenue is currently underway. Sumitomo will ascertain the extent of the damage as quickly as possible and cooperate with relevant parties to implement appropriate recovery and reconstruction measures, the government added. A company spokesperson stated that the restart timeline has not yet been determined, and the assessment of the extent of the damage is expected to take several weeks. Ambatovi is owned by Sumitomo, and the state-owned Korea Mining Reconstruction Mineral Resources Corporation (KOMIR) produced approximately 28,000 metric tons of nickel and approximately 2,500 metric tons of cobalt in 2024.

Evaluation and Analysis

Nickel

Sumitomo Corporation's Ambatovi nickel-cobalt project in Madagascar was shut down due to a tropical cyclone. The project has an annual production capacity of approximately 28,000 metric tons of nickel. This supply disruption will lead to a short-term reduction in spot market supply, while demand remains relatively stable, which is expected to drive up nickel spot prices. Natural disasters typically trigger market concerns about supply shortages, which is bullish for prices.

Cobalt

The Ambatovi project, with an annual output of approximately 2,500 tons of cobalt, was shut down due to damage to facilities caused by a cyclone. This sudden reduction in supply will exacerbate tightness in the spot market, potentially leading to a short-term rise in cobalt spot prices. The risk of production disruption has boosted bullish sentiment in the market, supporting cobalt prices. Although the recovery time remains uncertain, the impact has already been priced into the market.

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