The nickel industry could get state and federal help after an "extremely concerning" warning from BHP on scaling back operations and investment.
BHP warned investors on Thursday of "unfavourable" market conditions that are expected to continue for a considerable time, with the entire Nickel West division potentially facing a period of care and maintenance.
Nickel prices have fallen sharply as Indonesia ramps up supply with China's backing, while cost pressures in Australia have increased.
"The BHP announcement today is extremely concerning," Western Australia Premier Roger Cook told reporters.
Mr Cook said workers would be concerned about the future of their industry and called on the federal government to add its support to state government efforts.
He said he had been speaking to federal Resources Minister Madeleine King "almost daily" over the past week and met with industry representatives last night to discuss support, including potential royalty relief and rebates.
"We're looking at all options in terms of how we can support the industry," he said, including companies with operations already mothballed and those with significant capital investment at stake.
This is a "significant structural disruption" to the industry and supply chain, not merely the usual boom-bust cycle in mining, he said.
"So it will not only need the state government, it will need government at all levels to do the heavy lifting to make sure we can assist the industry deal with these global trends," he said.
BHP warned spending plans for Nickel West and West Musgrave, acquired from OZ Minerals in 2023, are all under review.
"This is an uncertain time for the Western Australian nickel industry and we are taking action to address the current market conditions," CEO Mike Henry said.
Shares in BHP fell 1.9 per cent or 86 cents to $45.09 in afternoon trade after it was forced to write down the value of its nickel assets and get set for damages from a past mine collapse in Brazil.
Ahead of results due on Tuesday, BHP said underlying earnings for the nickel division would be a loss of $US0.2 billion ($A300 million) for the six months to December 31.
A charge of approximately $US2.5 billion ($A3.9 billion) post-tax, or $US3.5 billion pre-tax ($A5.4 billion), would be made for the WA nickel operations.
The Kambalda plant that processes ore and concentrate from other companies will be placed into care and maintenance in June, after producer Wyloo Metal's decision to suspend its Cassini and Northern Operations mines from May.
BHP will also increase charges on the balance sheet from the deadly and highly polluting Samarco dam failure in Brazil in 2015.
The federal resources minister has been contacted for comment on industry support plans.
