DIGIVESTASI - Indonesia's producers of cheap nickel will push out its competitors in the coming years. Christelle Borries, head of French mining company Eramet, said this will make Indonesia one of the world's leading producers of metals for electric vehicle batteries.

Citing a Financial Times report, Borys said Indonesia is likely to produce more than three-quarters of the world's best pure nickel in the next five years. This will have serious implications for competitors in other countries. "This will make most of the old traditional players structurally uncompetitive in the future," Borys told the Financial Times on Wednesday (February 28, 2024). "Some [nickel] industries in other countries will disappear or be subsidized by the government." 

Uncompetitive mines elsewhere will be closed, he added. Borys does not think many governments will decide to subsidize large-scale production at high costs just to compete with Indonesia's nickel production. 

Major changes in the market and falling nickel prices have impacted mining companies such as BHP, IGO and First Quantum. All three companies have reduced production and closed mines in Western Australia. Eramet itself has benefited from this, but has also been affected. The French company operates one of the world's largest nickel mines, Weda Bay in Indonesia, and also has mines in New Caledonia through its subsidiary Société le Nickel (SLN). 

Borries' comments come as Eramet is at odds with the French government, which owns 27% of the company, over how to complete SLN's loss-making nickel plant. However, Eramet refused further funding. 
Now, as the nickel market crisis worsens, Swiss mining company Glencore announced plans to sell its stake in the Coniambo project in New Caledonia. This is because the company has been making losses on the asset for more than a decade.

Meanwhile, commodity trading company Trafigura is also in talks with the French government regarding Prony Resources, the region's third-largest nickel producer. Borys said Eramet will continue to operate the mine for now, but "will not consider" other nickel investments in New Caledonia, including the Coniambo rescue.

After two years of price increases, nickel prices fell more than 30% last year to $17,462 per ton. Few believe that if Chinese companies continue to invest in Indonesia's natural resources, the oversupply will disappear anytime soon.

"There are serious structural challenges arising from nickel in Indonesia," said Duncan Wanblad, CEO of Anglo American, which operates nickel mines in Brazil. "This is certainly putting cost pressure on most other ferronickel companies that exist in the world today."

Eramet last week reported an 85% drop in net profit in 2023 to 109 million euros, including a 218 million euro write-down of SLN. In New Caledonia, Emmanuel Macron's government has reason to try to save the industry. France seeks to reduce its automotive industry's dependence on Indonesia and China for strategic supplies and avoid turmoil in a region seeking independence. 

But the French government is also under pressure to cut spending and eliminate cash offers unless companies intervene on their own. Borys recommends that New Caledonia prepare for the nickel industry contraction by creating jobs in tourism and agriculture. 

"To be honest, we used to rely too much on pennies because it's an easy way to make money," he said. He added that the region could become a "mining zone" by closing profitable smelters and abandoning profitable mines.
 

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