April 9, 2009 / 2:21 PM / 10 years ago

Cuba admits nickel prices barely cover costs

*Cuba warns nickel prices threaten profitability

*One of world’s largest suppliers considers cutbacks

HAVANA, April 9 (Reuters) - Cuban Vice President Jose Machado Ventura warned international nickel prices were on the verge of making the island’s most important export industry unprofitable, state-run radio reported Thursday.

“Nickel has declined from $50,000 per tonne to $10,000, $9,000 and at $9,000 it is no longer profitable, and we have been selling nickel these days at $9,000, then up to $10,000,” Machado told reporters in eastern Cuba where the industry is located.

Ventura’s statement was the latest indication the government is considering cutting back on unrefined nickel and cobalt production at two state-run processing plants.

The country produced some 70,000 tonnes in 2008 for export.

Cuba’s two state-run plants average 117 barrels of fuel oil to produce a tonne of product for market, according to western businessmen.

A third plant run as a joint venture with Canada’s Sherritt International (S.TO) consumes around 35 barrels of oil per tonne of output, they said, and plans to produce around 33,000 tonnes this year.

State-run television’s top economic commentator, Ariel Terrero, said last month that the international economic crisis was hitting the nickel industry hard, with little prospect for improvement in the short term.

“Evidently we will have to take measures. They are studying the best way to adjust production in the face of low prices on the international market,” he said.

The Caribbean island is one of the world’s largest nickel producers and supplies 10 percent of the world’s cobalt, according to Cuba’s Basic Industry Ministry.

Nickel is essential in the production of stainless steel and other corrosion-resistant alloys, while cobalt is critical for making super alloys used in aircraft engines and other products.

Nickel has accounted for more than 50 percent of export earnings in recent years, not including services.

Since the United States established a commission in 2006 to track Cuban nickel as part of sanctions, information on the sector has been restricted.

Cuban nickel is considered to be Class II with an average 90 percent nickel content.

Cuba’s National Minerals Resource Center has reported that eastern Holguin province has 34 percent of the world’s known reserves, or some 800 million tonnes, of proven nickel plus cobalt reserves.

The center says the region holds an additional 2.2 billion tonnes of probable reserves, with lesser reserves in other parts of the country. (Reporting by Marc Frank; Editing by John Picinich)

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