29 Feb 2024

New Caledonia’s nickel crisis prompts call for 'economic, social state of emergency'

3:40 pm on 29 February 2024
New Caledonia's Koniambo - KNS - mining site aerial view.

New Caledonia's Koniambo - KNS - mining site aerial view. Photo: KNS

Analysis - New Caledonia's current nickel industry crisis has prompted several pro-French parties to call for a "state of economic urgency".

The French Pacific archipelago's nickel industry (including its three major plants) is in dire straits: in the North of the main island, Koniambo's (KNS) main stakeholder, Anglo-Swiss giant Glencore, is now withdrawing from the venture.

The measure announced a few days ago that is putting the whole site in sleep ("care and maintenance") mode has become very real.

In the South of the main island, Société Le Nickel - SLN - plant, a subsidiary of French giant Eramet recently had to be bailed out by a French government loan to avoid an ominous bankruptcy.

The other Southern plant, owned by Prony Resources, is also trying to keep its head above water and is currently engaged in a major restructuring of its stock to allow a major industrial partner to invest.

On Wednesday this week, KNS chairman Neil Meadows held a press conference in Vavouto, on the now-idle Koniambo mining site.

The whole site has now started to implement the "care and maintenance" measures announced by Glencore earlier this month, making the announced steps painfully real.

This involves keeping some 1300 Glencore's core staff busy (with on-site cleaning and maintenance tasks or to engage them in training sessions) while ensuring the smelters remain "hot" in order to be ready to re-start in case a new investor agrees to take over Glencore's 49 percent in the KNS stock.

Glencore has assured that its KNS staff will keep getting paid for the next six months.

But up to another estimated 2000 staff employed by KNS on-site subcontractors do not have this kind of protection and are already facing the brunt of Koniambo's being placed in sleep mode.

French mining giant Eramet Chairperson Christel Bories dropped a bombshell this week, in an interview with The Financial Times.

French mining giant Eramet Chairperson Christel Bories dropped a bombshell this week, in an interview with The Financial Times. Photo: Eramet

Trickle-down social consequences

Nickel being the main pillar of New Caledonia's economy, in recent days, several political and union groupings have warned of the "seriousness" of New Caledonia's acute nickel situation and its potential domino-like, trickle-down social consequences, both for households and companies.

On Monday, four members of the local government, all from pro-France parties, also called for an "economic and social state of emergency" to be declared in New Caledonia.

The group includes former President of New Caledonia, Thierry Santa (from Rassemblement -LR- party), now still a member of the executive as minister for labour and employment.

New Caledonia's "collegial" government, which is made up proportionally by both pro-France and pro-independence parties, is currently headed by the French Pacific archipelago's pro-independence parties.

"We are no longer on the verge of hitting the wall, we've already crashed into the wall", Santa told reporters, asking for the government he is part of to take appropriate measures, including a series of large-scale works to boost employment.

This would include launching several large projects, including major upgrading works on roads and other infrastructure.

"Agissons Solidaires" (- AS - "Let's Act In Solidarity) grouping was speaking in similar terms later this week.

"It's no longer a matter of months, but a matter of days (...) Putting KNS to sleep is just the first drop of water from a huge wave that will fall upon us and drown us", AS leader (as well as President of employers union MEDEF-NC) Mimsy Daly told a press conference earlier this week, in reference to New Caledonia's current economic woes.

AS is calling upon the local government to urgently put in place a plan to kick-start the economy again and to place a moratorium on any new tax scheme.

And if their call is not heeded, AS is already threatening to call its members to take to the streets of Nouméa.

'Nickel pact' proposed for signing

The French government (including its finance minister Bruno Lemaire, who visited in November 2023) is trying to get all of New Caledonia's nickel stakeholders (three mining sites, all in dire financial difficulties) to sign what it calls a "nickel pact" to implement stringent reforms.

The French minister has planned 25 March as the proposed date for signing his "nickel pact".

The aim was to make New Caledonia's nickel more competitive on the global market, in the face of an increasing production of low-cost nickel from China and Indonesia, as well as an increasing world demand for nickel to produce, amongst other things, batteries for new generation electric vehicles.

Eramet's chairwoman drops a bombshell

On a global scale, Eramet Chairperson, Christel Bories, dropped a bombshell this week, in an interview with The Financial Times.

In a rarely frank interview on Sunday 25 February, she predicted that Eramet's subsidiary SLN (Société Le Nickel) in New Caledonia, would be part of those nickel mining sites and smelters at risk of being "wiped out (...) within five years" because of its "lack of competitivity and the emergence of Indonesia as a major high quality and low cost producer.

She predicted that Indonesia could end up accounting for more than three-quarters of the world's highest class of pure nickel in five years from now.

"I very much doubt that many governments can be found who still want to massively subsidise (...) to compete with Indonesian production", she said.

Eramet is reported to have obtained recently a 60-million Euros emergency subsidy from the French government (who holds 27 percent of shares in Eramet) to be able to continue operating until at least April 2024.

Bories also clearly affirmed that from now on, Eramet would "never" consider fresh investments in New Caledonia's nickel.

She further suggested that New Caledonia should, from now on, prepare to transition to a more tourism and agriculture oriented economy.

"Frankly, in the past, (New Caledonia) has relied too much on the nickel, because it was the easy way to get money", she lashed out, further recommending that in future, New Caledonia's nickel industry should solely focus on profitable extraction mining and close the cash-bleeding nickel processing smelters.

As a result, she foresaw, New Caledonia could transform into a "mining only" territory.

Eramet also holds interests in operations in Indonesia's Weda Bay, now regarded as the world's largest nickel mine.

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