BHP’s Green Nickel Hub Plans on Hold as Market Conditions Force Mothballing of Nickel West
BHP Group's ambitious project to establish a green nickel hub in Western Australia is on hold, with the mining giant announcing that its Nickel West division will be placed on care and maintenance later this year. This decision comes after significant market turmoil and depressed nickel prices overshadowed the company's substantial investments and green initiatives.
Since 2020, BHP has invested $3 billion to transform Nickel West into a key supplier of nickel sulphate for electric vehicle (EV) batteries. The company even secured a supply deal with Tesla Inc. in 2021, promoting its nickel as "one of the most sustainable and lowest carbon emission" brands globally. However, low prices have outweighed green credentials, a trend also seen in other battery metals like lithium and cobalt.
Despite claims from Western producers that metals produced to higher environmental and social standards should command a premium, the current market does not reflect this. Defining what qualifies as "green" metal remains a challenge.
The Impact of Chinese Investment in Indonesian Nickel
China's significant investment in its own EV supply chain has led to global overproduction and falling prices. Indonesia, a major beneficiary of China's Belt and Road Initiative, received $7.3 billion in investment last year, much of which went into developing its extensive nickel deposits. In just five years, Indonesian nickel production has surged from 600,000 metric tons to over 2 million metric tons.
This rapid expansion has come at a substantial ecological and social cost. Reports highlight issues such as land rights violations, deforestation, pollution, and poor work practices. Additionally, Indonesia's nickel production has a high carbon footprint, largely powered by coal.
Challenges in Defining Green Nickel
Not all Indonesian nickel producers have poor environmental records. For instance, PT Vale has operated in Indonesia for 56 years, citing examples of environmental stewardship. However, many operations, particularly those linked to the recent Chinese investment boom, lack transparency and fail to meet environmental, social, and governance (ESG) standards.
Benchmark Mineral Intelligence (BMI) estimates that less than a third of global nickel production comes from operators committed to ESG transparency. This lack of transparency makes it difficult to determine the true environmental and social impact of nickel used in EV batteries.
The Push for Supply-Chain Transparency
To address these issues, some companies are pushing for greater supply-chain transparency. For example, Talon Metals plans to ensure traceability of nickel from its Tamarack mine in Minnesota through a partnership with Circulor, which is already active in the cobalt market.
Automotive companies face increasing pressure to ensure their supply chains meet stringent environmental and social criteria. The upcoming EU Battery Passport, set to be implemented in 2027, will require detailed information on the carbon footprint, environmental impact, and full supply-chain transparency of battery materials like nickel and cobalt.
As Indonesian nickel production continues to grow, driving down prices and challenging higher-standard operators, the automotive industry may face significant challenges. If companies are not prepared to pay a premium for ethically sourced metals, they must at least be able to identify and avoid metals that do not meet high environmental and social standards.
