Published: Wednesday, May 22, 2024
JAKARTA (Indonesia) — The global nickel price has risen since violent violence broke out in New Caledonia, a French Pacific territory.
The French overseas territory has been ruled by France for more than 170 years. It is a global leader in the production of critical materials that are needed to manufacture electric vehicle batteries, steel, solar panels and everyday items.
This article will explain the importance of the nickel industry in New Caledonia and how social unrest has affected prices.
After French lawmakers approved amendments to the French Constitution, allowing residents of New Caledonia who have lived there for at least 10 years to be able to vote in local elections, riots broke out.
The measure is feared by opponents as a way to benefit pro-France politicians, especially in New Caledonia where pro-independence Indigenous Kanaks are pushing for independence.
The 270,000 Kanaks who live on the archipelago want independence, but many descendants of French people and non-Indigenous peoples have settled in the island. They also want to stay part of France.
The French declared an emergency of 12 days on May 15th. The French rushed 1,000 troops in to reinforce security forces who had lost control of certain parts of Noumea’s capital.
New Caledonia has between 20-30% the world’s reserves of nickel. The nickel industry is an important part of New Caledonia’s economy. It accounts for up to 90% its exports, and employs around a quarter.
Nickel is a critical material for the European Union. This means that it is important economically and strategically to Europe’s economy, but its supply is associated with a high risk.
Nicholas Ferns is a Monash University research fellow in Australia. He said that France’s desire to retain control of New Caledonia may be motivated by the hope to secure large nickel deposits.
The United States, and EU member countries have been working to secure their critical material supply chain to catch up to China. China controls or has invested in a significant share of world supplies.
In 2021, EV manufacturer Tesla invested in the Goro Nickel Mine when it was sold by a local consortium owned by local stakeholders.
The unrest in New Caledonia and Russian sanctions on metals, including nickel, have caused global prices to rise above $20,000 per tonne for the first since September.
Nickel prices on the London Metal Exchange jumped to $21,275 a metric ton on Tuesday, up from $18,510 per metric ton on May 8. The increase was a direct result of the unrest that began on May 8th.
The price spike came as the Paris-based International Energy Agency warned in a recent report that future shortages of essential materials, including nickel, could be caused by the “rapid growth” in EV demand and mine closures.
Lawrence Loh is a professor of strategy at the National University of Singapore Business School. He said that the high nickel price will have a profound impact on consumers. We expect that the increase in prices of consumer goods will have a ripple effect, leading to inflationary pressures.
New Caledonia’s nickel industry, despite the fact that sharp increases in commodity prices can be disruptive to industries, was already in trouble before the political crisis because of a 45% decline in global nickel prices in 2013.
This slammed an economy that relied on the nickel industry. New Caledonia is having a hard time competing with Indonesia, which is the largest nickel producer in the world, because of decades of export restrictions. High energy costs have also made it more expensive to produce nickel. Ferns said that the nickel industry in New Caledonia is inevitably linked to the independence debate. The recent drop in nickel prices has worsened New Caledonia’s economic problems, which are then linked to the recent riots.
The French government has promised to provide subsidies for the nickel industry in the territory.
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Source: ABC News