Reuters

Cuba will proceed with plans to build a ferronickel plant with its ally Venezuela, even though a dramatic drop in international prices has drained the island’s foreign income, a government official said on Monday.

The communist-run island is one the world’s biggest producers of nickel and cobalt.

“We continue to work on this new project of ferronickel that should add in the next two to two-and-a-half years a significant quantity of ferronickel,” Juan Ruiz, director of Cuba’s state-owned Nickel Export Company, said in an interview with Cuban television.

Cuba produced some 70,000 tonnes of unrefined nickel plus cobalt in 2008. The mineral is mostly exported to China.

The new $600 million ferronickel plant will be located in Las Camariocas, in Cuba’s eastern province of Holguin where the island’s nickel industry is based.

In 2007, Venezuela, Havana’s main political and economic ally, replaced China’s state-owned Minmetals Corp. as Cuba’s partner in the ferronickel joint venture.

Cuban officials have said in the past the plant could produce annually up to 68,000 tonnes of ferronickel, an alloy used in making stainless steel.

But nickel prices have dropped so sharply in recent months that Cuban authorities earlier warned that the nickel industry was on the verge of being unprofitable.

Ruiz said Cuba is undertaking a series of cost-saving measures to keep its nickel industry afloat, such as using crude oil produced in Cuba instead of imported oil to power the plants.

“Our production fortunately goes according to plan, but it’s obvious that at these price levels we can not expect to contribute much, like in past years, to the country’s economy,” he said.

Nickel has been until recently Cuba’s main source of foreign export income and accounted in recent years for more than 50 percent of the country’s export earnings aside from services.

Cuba has three nickel processing plants, one of which is operated with Canada’s Sherritt International.

(Reporting by Esteban Israel; editing by Jeff Franks and David Gregorio)

—————————————- Havana Journal Comments—————————————-

Havana Journal Inc. owns CubaNickel.com and is always looking for development partners.