June 21. 2024. 3:00

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Amid growing social unrest, New Caledonia’s nickel industry is also in turmoil

While the violence continues in New Caledonia, the archipelago is in a precarious economic situation, plagued for months by falling nickel prices, of which it holds 20% to 30% of the world’s reserves.

New Caledonia, a French overseas territory based in the southwest of the Pacific Ocean, has been hit by a wave of violence unseen since the 1980s.

Six people have been killed in one week, including two gendarmes – military law enforcement officers – along with several hundred injured.

These clashes, taking place 17,000 kilometres away from France, originated in a modification of the electoral body, voted by the National Assembly, but are also fueled by a severe social crisis.

“Clear the roads, let the doctors and the nurses go in and save people. Let people circulate,” he urged as demonstrators set up roadblocks in specific Nouméa neighbourhoods.

Colonised by France in 1853, New Caledonia, like Polynesia, is a strategic location for French interests in the Pacific. Its rich mineral resources make it a valuable resource for French interests. According to various estimates, it holds 20% to 30% of the world’s nickel stocks, a mineral used in the archipelago to manufacture stainless steel.

Thanks to its ability to withstand high temperatures and corrosion, nickel is indispensable in many low-carbon technologies, such as solar panels, wind turbines, nuclear power plants, and batteries for electric vehicles. The EU has added it to its list of critical raw materials.

The ‘curse’ of New Caledonia

“Nickel is the curse of New Caledonia,” says commodities economist Philippe Chalmin for BFM TV, lamenting that the archipelago’s development depends entirely on this resource.

According to a report by the Institut d’émission d’Outre-mer (IEOM), more than 15,000 people make their living from nickel in New Caledonia, 25% of all the territory’s employees out of its 270,000 inhabitants.

According to the Bureau de Recherches Géologiques et Minières, as of 2020, there were over 1,500 mining titles in the region, plus three processing plants, but the sector has been hit hard by falling prices.

Global prices have fallen by more than 45% in 2023 to around €19,000 per tonne, while the production cost of New Caledonian nickel is estimated at €22,000 per tonne.

Despite growing demand worldwide, prices are being driven down by the rapid expansion of production in Indonesia. Thanks to financial support from China, Indonesia has increased its output tenfold in a decade, reaching 1.8 million tonnes in 2023, while New Caledonia’s production has reached a ceiling of 230,000 tonnes.

With this challenging situation, the giant mining company Glencore decided to sell its shares in the Koniambo Nickel (KNS) plant, mothballing the metallurgical complex in the pro-independence Northern Province.

“This closure was seen as a trauma by Kanak leaders, who see their appropriation of the industrial tool as a political emancipation project,” notes anthropologist Pierre-Yves Le Meur, a research doctor at the Institut de recherche pour le développement (IRD), based in Nouméa.

Saving the nickel industry

World nickel prices have risen again since the start of the crisis in New Caledonia, and the International Energy Agency (IEA) points out in a report that “falling prices for critical minerals,” such as copper, lithium, and nickel, “mask the risk of future supply tensions.”

To save New Caledonia’s nickel industry, the French Minister of the Economy, Bruno Lemaire, presented a “nickel pact” in November 2023.

The plan is to help the archipelago’s three metallurgical plants by subsidising energy prices by €200 million, including €66.7 million provided by the Caledonian provinces. It also includes the development of New Caledonia’s electricity production capacity.

Today, imported petroleum products and coal meet 97% of local energy needs.

An August 2023 audit by the French Inspectorate General of Finances (IGF) also recommended developing the production of mattes, a product with a higher nickel concentration that can be used in batteries after refining, instead of the ferronickel produced in two of the archipelago’s three plants.

The IGF report also recommended the resumption of raw ore exports, notably to France and the EU, which are much more profitable.

A few days ago, as part of the Choose France summit, Bruno Le Maire announced the creation of a nickel refining plant in Nouvelle-Aquitaine, in mainland France, to be built by the Swiss company KL1.

Read more with Euractiv

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