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What New Caledonia riots imply for the nickel market

A wave of civil unrest in New Caledonia, a French abroad territory in the southern Pacific that is a leading nickel manufacturer, has stopped mining operations and supported a rally in rates for the metal.

Here's why New Caledonia's nickel industry matters politically and on international markets.

HOW BIG IS NEW CALEDONIA'S NICKEL SECTOR AND WHO RUNS IT?

New Caledonia holds the world's 5th biggest reserves of nickel, a metal mainly utilized in stainless-steel and increasingly for electrical automobile batteries, and in 2023 ranked No. 3 worldwide in terms of mined nickel.

The archipelago's nickel mining market dates back to the 19th century when the territory and its native Kanak population were colonised by France.

New Caledonia's 3 main nickel companies are Koniambo Nickel SAS (KNS), Prony Resources New Caledonia (PRNC) and Societe Le Nickel (SLN). Each supplies its own processing plant. Together they generate around 13,000 direct and indirect tasks, according to the authorities.

KNS is owned by New Caledonia's northern province and international miner and trader Glencore, PRNC has several investors consisting of commodity merchant Trafigura, while SLN - New Caledonia's historic nickel producer - is majority owned by French mining group Eramet.

WHAT IMPACT HAS THE DISCONTENT HAD ON THE NICKEL INDUSTRY?

Most mines have stopped running, while SLN has actually reported fire damage to a conveyor at one mine. SLN has actually likewise decreased output to minimum capacity at its processing plant.

The unrest supported a rally in benchmark nickel rates on the London Metal Exchange to nine-month highs, before rates fell back. Lowered Brand-new Caledonian output could deteriorate a. international surplus.

New Caledonian output was below complete capability before the. riots and experts expect costs to be capped longer term by. continuing development in Indonesian supply.

KNS' mine and processing plant have been idled because. February and consistent disturbance to SLN's mines has actually suppressed its. capacity.

WHY IS NEW CALEDONIA'S NICKEL SECTOR STRUGGLING?

The three miners lost money practically constantly over the. past decade. They have actually relied on financial support from personal. shareholders and the French state, with the latter offering 700. million euros ($ 759 million) over 2016-2023.

High energy and labour costs in the remote area have. dogged the miners, while technical setbacks have actually likewise harmed. output.

New Caledonia faces tough competitors from more affordable. providers. Indonesia has quickly emerged as a nickel powerhouse,. representing over half of nickel mined worldwide in 2023.

New Caledonia's political tensions have actually formed the industry. The pro-independence northern province opposes exports of. unrefined nickel ore and has had long-running permit disputes. with SLN, which wishes to expand ore shipments.

The industry teetered on the brink of collapse last year. when international rates plunged and after both Eramet and Glencore. said they would no longer inject funds.

The French federal government has been working out a rescue package,. consisting of a commitment to supply metal to Europe's battery. supply chain. However talks have actually stalled amidst the souring relations. between pro-independence and loyalist parties.

The propositions include hundreds of countless euros of. public loans and energy subsidies along with a revamp of mining. permits, exports and energy infrastructure.

WILL THE SECTOR FIND NEW INVESTORS?

Glencore and Prony are both trying to offer stakes in their. respective companies.

Even before the discontent, experts saw headwinds.

It's challenging to put any names on potential investors,. stated Nikhil Shah at consultancy CRU. Concerns over supply-chain. dependence on Indonesia may assist preserve interest in New. Caledonian nickel, he added.

KNS' plant has actually been afflicted by engineering concerns however if. solved it could leverage an effective mine and port, mining. specialist Didier Julienne said.

Glencore has actually idled its KNS plant for six months while it. looks for a buyer for its 49% stake.

KNS informed by email that a possible extension of the. period was being studied but that this was unrelated to the. unrest. Glencore said in an emailed declaration: The sale process. remains continuous. We have no plans to extend it.

PRNC informed in April that it sought a core investor to. get a 74% interest by purchasing out investors including. Trafigura. The group was relaunched in 2021 when Brazil's Vale. offered business. An agreement with Tesla. declared a concentrate on EV batteries.

Eramet has stated it will offer continuous operational support. for SLN after a deal with Paris to transform financial obligation. A representative. said there were no conversations to offer SLN.

(source: Reuters)