New Caledonia’s Nickel Industry Faces Crisis Amidst Social Unrest
New Caledonia is experiencing unprecedented violence and economic instability due to falling nickel prices, despite holding 20% to 30% of the world's reserves. The archipelago has been embroiled in a wave of violence not seen since the 1980s, resulting in six deaths and hundreds of injuries in one week. The unrest stems from a modification of the electoral body, compounded by a severe social crisis.
Vaimu’a Muliava, a government member responsible for civil service, urged the restoration of order, emphasizing the need for medical personnel to move freely amidst roadblocks set up by demonstrators in Nouméa.
Colonized by France in 1853, New Caledonia is strategically significant for French interests in the Pacific and rich in mineral resources. The territory's economy heavily depends on nickel, which is vital for manufacturing stainless steel and many low-carbon technologies, including solar panels, wind turbines, nuclear power plants, and electric vehicle batteries. Nickel's ability to withstand high temperatures and corrosion makes it indispensable in these applications, earning it a place on the European Union's list of critical raw materials.
Commodities economist Philippe Chalmin refers to nickel as New Caledonia's "curse," as the archipelago's development is tightly linked to this resource. The Institut d’émission d’Outre-mer (IEOM) reports that over 15,000 people are employed in the nickel industry, representing 25% of the workforce in this territory of 270,000 inhabitants.
Despite its significant reserves, New Caledonia's nickel industry faces challenges due to plummeting world prices, which have dropped by more than 45% in 2023 to around 19,000 euros per tonne. This is below the production cost of New Caledonian nickel, estimated at 22,000 euros per tonne. The rapid expansion of production in Indonesia, bolstered by Chinese financial support, has driven down global prices. Indonesia's output has surged tenfold in a decade, reaching 1.8 million tonnes in 2023, while New Caledonia's production remains capped at 230,000 tonnes.
In response to these challenges, Glencore decided to sell its shares in the Koniambo Nickel (KNS) plant, leading to the mothballing of the metallurgical complex in the pro-independence Northern Province. This move was traumatic for Kanak leaders, who viewed the industrial complex as a symbol of political emancipation, notes Pierre-Yves Le Meur, an anthropologist at the Institut de recherche pour le développement (IRD).
With rising global nickel prices since the onset of the New Caledonian crisis, the International Energy Agency (IEA) warns that "falling prices for critical minerals" like copper, lithium, and nickel "mask the risk of future supply tensions." To support the struggling nickel industry, French Minister of the Economy Bruno Le Maire introduced a "nickel pact" in November 2023. The plan includes a 200 million euro subsidy for energy prices, with 66.7 million euros contributed by Caledonian provinces, and aims to boost local electricity production, which currently relies on imported petroleum products and coal.
However, the French government's proposals face skepticism. An August 2023 audit by the French Inspectorate General of Finances (IGF) recommended producing nickel mattes, a higher concentration product used in batteries, instead of the ferronickels currently produced by two of the archipelago's three plants. The IGF also suggested resuming raw ore exports to France and the EU, which are more profitable.
Recently, at the Choose France summit, Bruno Le Maire announced the creation of a nickel refining plant in Nouvelle-Aquitaine, to be built by the Swiss company KL1. The plant's potential supply source includes nickel from New Caledonia. In March 2023, the European Union introduced a Critical Raw Material Act to ensure strategic raw materials' autonomy.
