Hi there blog readers!

I'm jumping in with a bit more on BHP Nickel West.

As you know from earlier posts today, the Big Australian confirmed a loss against its nickel business  while handing down its half-year results today.

Boss Mike Henry really tried to talk down that loss, saying it was only a small part of the entire business, during a briefing with media this morning.

To his point, it does only account for a tiny fraction of the world's biggest miner — that vast majority is its iron ore business, which accounted for 77 per cent of BHP's underlying earnings for the period.

But the Australian nickel sector is on its knees as an influx of Indonesian nickel floods the market, pushing down the global nickel price and making it uneconomical for Australian producers to compete.

I've just sat down with Hayden Bairstow who is the head of research at Argonaut — an investment firm that specialises in the resources sector.

He agreed with Mr Henry's remarks this morning that the growth from Indonesia had taken the sector by surprise.

He said if growth projections continued they'd be supplying much more than the market currently wanted.

"You look at some of the numbers in Indonesia, I mean, they're quite remarkable really.

"The nickel market's a roughly 2.5 million tonnes a year industry, and the Indonesians, who were producing hardly anything seven or eight years ago, produced 1 million tonnes 2019.

"They're pushing the plans eventually to push towards 4 or 5 million tonnes, which creates huge overcapacity in the industry."

In a briefing to investors this morning, Mr Henry said a decision to put the entire Nickel West business (including its mines concentrator, smelter and refinery) into care and maintenance, was still a few months away.

Putting an operation into care and maintenance is very expensive.

Mr Bairstow told me it might cost just as much to do that as keeping the business running at a loss. 

"Their ability to make that decision is not as simple as say a smaller miner is.

"The care and maintenance costs, for example, may well be the same as what they're losing now — so it's sort of, well, you might as well keep going type attitude, so that needs to be considered in these decisions that BHP makes.

"But the key message I think, is, yes, there's a lot of people working at Nickel West, but given the closure and clean-up liabilities, the decision of sustaining a business that's losing a bit of money, versus putting it on care and maintenance or even moving to foreclosure, that may actually be a bigger capital decision over time than actually keeping it going."

Which will probably be welcome news to the 3,300 people who are employed by BHP Nickel West and wondering about their futures.

Both the federal and state governments have announced some forms of relief in recent days.

On Friday, nickel was added to the federal government's critical minerals list, which means players can apply for a pool of funding that's available to all minerals on the list.

While on Saturday, the WA government announced it would delay 50 per cent of royalty payments for 18 months — though miners will still have to pay those royalties to the government in a couple of years.

Mr Bairstow told me it's too late for some in the sector.

"It barely touches the sides, to be honest.

"So it doesn't really look like at this point that it'll be enough to save anything.

"Of course, you could go for tax relief as well, but if you've got negative earnings, you haven't got any tax, so it doesn't make any difference."

I'll explain a bit more about this issue on The Business tonight.