Unrest in New Caledonia pushes nickel sector into deeper crisis

Weeks of unrest in New Caledonia have brought the archipelago’s nickel industry, already on government life support, closer to disaster, sector officials say.

The French Pacific territory is the world’s third-largest nickel producer, after Indonesia and the Philippines and ahead of Russia and Australia.

Nickel, a silver metal used as an alloy to make stainless steel, electronic components and jewelry, is also a key ingredient in electric vehicle batteries, making it crucial to the transition to cleaner energy.

However, since May 13, when riots broke out sparked by the constitutional reform project, nickel mining and processing has been suspended.

And although France has lifted its state of emergency across the territory after two weeks of unrest that left seven people dead and hundreds injured, few expect a quick return to normality in the nickel industry.

– “Working on empty” –

Mining operations at Societe Le Nickel (SLN), a historic nickel producer, have ceased and ore reserves – a steady supply of which is essential to maintaining high-temperature refining operations – are declining.

“We are running out of supplies,” said a source at one of the plants near the capital Noumea.

The disruption caused by attacks and destruction at some plants during the chaos came at the worst possible time for local producers, who are already buckling under pressure from competition from cheaper producers, especially Indonesia.

New Caledonia has as much as 30 percent of the world’s nickel reserves, and the nickel industry employs 20-25 percent of the working population of the 270,000-strong archipelago.

Back in February, SLN, a subsidiary of mining giant Eramet, received a 60 million euro ($65 million) government loan to avert bankruptcy.

In southern New Caledonia, the Prony Resources plant, also kept alive thanks to a 140 million euro loan granted in March, has also stopped operating, AFP reported.

The northern Koniambo Nickel (KNS) plant has been idle since February while conglomerate Glencore, which owns 49 percent of the loss-making business, tries to sell its stake.

Nickel mining, which unlike refining is often run by small operators, also suffered from lockdowns during the unrest that cut them off from supplies of vital fuel.

– “Disastrous” –

“The consequences for the mine and New Caledonia are devastating,” said Thomas Sevetre, chief executive of mining company Georges-Montagnat.

The situation could get even worse if shipping companies add a risk premium to freight charges due to the political situation, Sevetre said.

“Our competitive gap with Indonesia and the Philippines will grow,” he said.

Global nickel prices are highly volatile, with rising demand and sanctions on Russian exports being more than offset by massive increases in production in Indonesia, which now accounts for about half of global production.

Talks initiated by French Finance Minister Bruno Le Maire to restore New Caledonia’s nickel industry with government assistance have stalled, with some pro-independence New Caledonian representatives stating they will not sign the proposed agreement.