Cuba quiere aumentar su producción de níquel y cobalto y aprovechar el alza de precios

Cuba wants to increase nickel and cobalt production and take advantage of rising prices


02 | 03 | 2022


The island has reserves of both strategic minerals, but without much impact on its Economics due to a lack of commitment to attracting capital.

In the picture

Nickel mine in Moa operated by Cuba's General Nickel and Canada's Sherritt International [Sherritt].

The increase in recent years in the international price of certain strategic metals and minerals that Cuba produces has brought slight relief to its sinking economy Economics. Cuba is relying on the recovery of a tourism industry that has collapsed due to the confinements caused by the Covid-19 pandemic, but the rise in the price of resources such as nickel and cobalt, as a result of international sanctions against Russia over the war in Ukraine, could also improve the Cuban state's income, as it aims to increase production of these metals. However, the lack of capital to increase mining extraction hinders a greater economic impact of the sector.

The rise of new technologies and the shift towards a green energy system have led to a worldwide increase in demand for metals such as nickel and cobalt. Cuba is among the countries with the largest reserves of these raw materials, which constitute some of the island's most valuable exports, especially in the case of nickel. Other metals or minerals, such as zinc, copper and iron, are also occasionally important in Cuba's exports, which are in any case headed by tobacco and sugar, although Cuba does not stand out in terms of their production worldwide.

Nickel is a mineral employee mainly used in the manufacture of stainless steel, as well as in metal alloys in high performing and, more recently, in rechargeable batteries. Like nickel, cobalt is an indispensable metal in the manufacture of many electronic devices in electric cars and mobile phones, which has increased its demand in recent years. According to the report According to the United States Geological Survey (USGS) global forecast for 2021, Cuba ranks as the world's ninth largest producer of nickel and fifth largest producer of cobalt, positioning it as a major contributor in these areas.

During the first decade of the century, Cuba produced around 70,000 tonnes of nickel per year, but production subsequently declined due to maintenance operations at the plants and the ups and downs in international prices (the drop in 2014, coinciding with the abrupt end of the then 'boom' in the price of hydrocarbons and some other materials, discouraged investment to increase extraction). The production figure has remained stable since 2014, with a average of approximately 56,000 tonnes per year. The Caribbean island has significant nickel reserves, some 5.5 million tonnes, but despite its comparative wealth, it only produced an estimated 49,000 tonnes in 2020. Indonesia is the world's leading nickel producer, consistent with its reservation of 21 million tonnes. Australia, Brazil and Russia follow, with reserves of 20, 16 and 6.9 million tonnes, respectively.

In 2019, nickel made up just over 11% of overall Cuban exports, destined primarily for China and a small percentage for Japan. The value of exports jumped significantly in 2017, almost doubling the previous year's sales to $141m; in 2018 it reached $179m, while in 2019 it dropped to $134m.

On the other hand, with reserves of cobalt estimated at 0.5 million tonnes, Cuba is the third country in the world with the largest reserves of this mineral, which is especially present in the region of Moa, in the east of the island, and where it is extracted together with nickel (both minerals often occur in the same rock). The country with the largest reserves is the Democratic Republic of Congo, with 3.5 million tonnes, followed by Australia, with 1.4 million metric tonnes, and Cuba, from agreement with the USGS's global report 2022 USGS global estimate for 2022. Of recent years, Cuba had its highest cobalt production in 2017, with an extraction of 5,000 tonnes. In both 2018 and 2019, the production figure remained stable at 3,800 tonnes. The forecast for 2021 pointed to a record increase in global cobalt mining and refining production due to an increase in existing operations, encouraged by a rise in market prices. Production in Cuba could have reached 3,900 tonnes in 2021, a slight increase from the previous year. In 2015, the value of cobalt exports reached $6.43 million.

The initial fear of a war in Eastern Europe involving Russia, a major producer of strategic natural resources, and then the very beginning of armed aggression and the advertisement of sanctions against Moscow, have led to an increase in the value of both metals, as well as other raw materials, on the international market. In early March, nickel was trading above $25,500 a tonne, accelerating a rise that had already been steady since it had fallen to $9,600 in 2016; cobalt reached $74,000 a tonne, in a rapid recovery from the mid-2019 low of $25,500.

This should improve part of the Cuban regime's expected income for 2022, although the damage that the conflict in Ukraine could cause for Russia's Economics also calls into question the aid that Moscow could provide to Havana. The latest ECLAC report , published at the beginning of 2022, estimates that Cuba's GDP could grow by 3.5 per cent this year, after a 2021 with hardly any growth (0.5 per cent) and a very negative 2020 (-10.9 per cent).

In the picture

International nickel and cobalt prices, in dollars per tonne.

Lack of investment

Mining remains a state-controlled activity in Cuba. The state-owned business Cubaniquel is in charge of operating the Che Guevara plant in the town of Moa. However, for decades, foreign companies have been present in the sector through joint ventures. Among these, the mixed company business Moa Nickel S.A., which has been operating as a joint venture with Canada since 1994, stands out. The shareholders of business are General Nickel Company on the Cuban side and Sherritt International on the Canadian side, each with a 50% stake in the shares. Moa Nickel S.A. responds to the corporate group Cubaniquel. Last November, Leon Binedell, president of Sherritt International, announced the intention to increase nickel and cobalt production by 15-20% from the 34,876 tonnes produced at the Pedro Soto Alba plant in 2020. According to Bloomberg, the strategic plan involves extending the mine's life beyond 2040 and is designed to meet growing demand for metals used in rechargeable batteries.

The advertisement came after the Cuban government committed to the modernisation of the nickel and cobalt processing industries in 2018. The business Cubaniquel aimed to produce more than 50,000 tonnes of nickel and cobalt that year, goal which was achieved.

But Cuba's difficulties in mobilising the necessary capital for new mining initiatives may detract from its strategic management weight in these two minerals that are indispensable for technology companies, especially because of their use in electronic car batteries and mobile phones. Cobalt, for example, is an essential raw subject material for lithium-ion batteries used in electric vehicles. Companies such as Tesla need it to improve the performance of their electric vehicles and Apple uses it to extend the battery life of the 'iPhones' it mass-produces in China.

Given its reserves, Cuba could play a more significant role in this area if it were to further liberalise its Economics to attract mining investments. One problem in the cobalt trade lies in the conditions of its extraction in the Democratic Republic of Congo, which is manager of most of the world's production, as mining activity there is carried out in a framework of human exploitation; furthermore, this high concentration of resource in a single country poses a risk of dependence for its consumers.

Nickel is also used in the manufacture of high-quality steel and other products in sectors such as energy, telecommunications, food equipment and medical machines because of its improved corrosion resistance. China is currently the world's largest consumer of nickel. Again, Cuba mines less nickel than would be expected given its ample reserves, and its production has lagged some years behind that of the neighbouring Dominican Republic.