Niggling and nagging but nickel not indispensable

Nickel is proving divisive with politicians arguing over the effectiveness of implementing safeguard mechanisms to prop up the ailing metal.

However, the Chamber of Minerals and Energy of WA (CME) welcomes the Western Australian state government taking on board its recommendation for a nickel royalty relief package with the launch of its Nickel Financial Assistance Program.

Western Australian Premier Roger Cook compares the need to support the nickel industry to subsidies given to Australia’s now defunct car industry.

Resources Minister Madeline King says the federal government will put nickel on the critical minerals list, in a move enabling nickel miners to apply to access a $4 billion fund.

The recent announcements come after mining giant BHP (ASX:BHP) reported it was considering mothballing its Nickel West division, putting thousands of jobs at risk.

Since September last year, 5 nickel mines have closed taking 33% of domestic production offline, with another 31% of production at risk.

Some 10,000 jobs are supported by Australia’s nickel industry, 99% of which are in Western Australia. About $1.8 billion of direct economic activity is generated from the country’s nickel industry.

As Mining.com.au reported yesterday, despite the current woes Prime Minister Anthony Albanese is “quite confident” the government can save Western Australia’s nickel industry before it’s lights out for other mining operations. 

A February report prepared by Mandala and commissioned by the CME titled A Critical Juncture: Australia’s Opportunities and Challenges in Nickel, outlines there has been a 51% decline in nickel prices since 2022 as supply has significantly increased due to output from the largest producer in the world, Indonesia.

The reports notes that Australia is well placed to capture growing opportunities in nickel with 9% growth forecasted annually up to 2030 due to demand for EVs and energy storage systems.

Australia plays a pivotal role in the world’s nickel market in which 18% of global reserves of the metal are currently situated in the country. About 6 times fewer emissions are produced from refining Australian nickel relative to other countries, including Indonesia, China, and Brazil.

Today, Indonesia accounts for nearly half (49%) of global nickel production, while Australia only accounts for 5%. Recent investments from China have enabled Indonesia to produce significantly cheaper nickel at scale from laterite deposits, placing Australia at a 28 per cent cost disadvantage.

Critical juncture

The Critical Juncture report notes that rapid increase in cheap Indonesian nickel has coincided with lower-than-expected demand for battery minerals due to global electric vehicle sales falling 3 per cent short of forecasts in 2023.

Western Australian nickel producers are also facing growing cost pressures. This is primarily in the form of higher labour costs, which account for a significant portion of overall production costs.

The Chamber of Minerals and Energy of WA says the government’s measures are promising and will go a long way to sustaining the state’s nickel industry in particular.

CME Chief Executive Officer Rebecca Tomkinson says the Nickel Financial Assistance Program highlights an understanding of the importance of nickel to the critical minerals aspirations of downstream processing.

“CME has made it very clear that targeted and evidence-based government support such as temporary royalty relief makes sense for the nickel sector in the near-term, given the significance of the industry to local employment, the economy, and our national strategic interests.

Battery minerals represent a strategically important sector for the state and we need to ensure we have a solution for the short- and mid-term, as well as settings that ensure viability and sustainability in the longer term.”

Tomkinson says removing inefficient government processes and delivering competitive fiscal settings will be needed to attract investment in Australia’s battery and critical minerals industry and achieve 2030 and 2050 decarbonisation targets.

Nickel is a key material required in battery manufacturing, specifically cathode and cell production. Without a domestic nickel industry, there are fears Australia will miss out on significant opportunities in the global battery value chain.

Recent studies have estimated these opportunities could be worth up to $17 billion in economic activity and 61,400 jobs for the nation.

Write to Adam Orlando at Mining.com.au

Images: CME & Widgie Nickel
Author Image
Written By Adam Orlando
Mining.com.au Editor-in-Chief Adam Orlando has more than 20 years’ experience in the media having held senior roles at various publications, including as Asia-Pacific Sector Head (Mining) at global newswire Acuris (formerly Mergermarket). Orlando has worked in newsrooms around the world including Hong Kong, Singapore, London, and Sydney.