Hard times have arrived in Sudbury, the Canadian town that is the world capital of nickel, as a collapse in demand puts an end to hopes of riches in a gritty Ontario mining community.

Vale, the Brazilian mining giant, is closing Copper Cliff, a nickel mine in the area, from January for an indeterminate period and has said that it will cut jobs with an early retirement programme.

It is postponing the development of another mine at Copper Cliff, while at Voisey's Bay, a vast nickel project in Labrador, production will be suspended in July.

A chill wind is blowing through Canada's mining communities, not from the Arctic but from the Far East. The spate of rapid shutdowns, cutbacks and retreats by the mining industry has come in response to an unprecedented collapse in base metal prices, caused by weakening demand from China.

Freeport-McMoRan, one of the world's biggest copper producers, said on Wednesday that it would cut production by 5 per cent next year and by 11 per cent in 2010. The American miner, which operates the huge Grasberg mine in Indonesia, is suspending its dividend and slashing capital expenditure.

Vale, the world's biggest iron ore producer, has cut 1,300 jobs since the slowdown began in the summer and has made an additional 5,000 workers idle with pay in order to reduce iron ore output.

Freeport's move failed to stem the flight from copper, which yesterday fell to $1.40 a lb, its lowest for more than three years, as grim data about job losses in America compounded fears about the fall in Chinese demand.

Aluminium is also tumbling, falling yesterday to a five-year low. This week, the Government of Yunnan, the Chinese province, a metals-producing region, said that it would buy one million tonnes of base metals in an attempt to shore up prices and stockpile cheap metal.

China is now a leading player in a market that is in turmoil, Gayle Berry, a metals analyst at Barclays Capital, said.

The country accounts for as much as a third of global demand for zinc and aluminium. “These price falls are unprecedented in scale and speed,” Ms Berry said. “For base metals, the short-term outlook is terrible. Half of the world's aluminium smelters are not making any money.”

However, analysts are predicting that a sharp price upturn could occur quickly in the second half of 2009, at the first sign of a recovery in demand.

“When the dust settles and there is a bottoming out of GDP expectations, we can expect price upturns,” Ms Berry said.

For towns like Sudbury, it is a case of the sooner, the better.

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