Australia has thrown a lifeline to its under-pressure nickel mining industry, but the solution offered is more of a stopgap than the major surgery necessary to turn the global nickel industry green and dirty.
Australia's Resources minister Madeleine King added nickel to the list of key minerals, a move that gives the industry access to a portion of A $4 billion ($2.7 billion) in federal government funding to promote minerals critical to the energy transition.
"International nickel prices are expected to remain relatively low until 2024 and may remain so for several years until the nickel glut in the market is corrected," Kim said in a statement on Feb. 16.
"At the same time, this puts more Australian nickel plants at risk," she said, adding that six Australian nickel plants had either announced production cuts or entered the care and maintenance phase since December.
Australia is the world's fifth-largest producer of nickel and recent price falls have made much of the industry unprofitable.
BHP Group, the world's largest mining company, said Feb. 15 it would take a $2.5 billion non-cash impairment charge on its nickel operations in Western Australia.
On February 16, the global benchmark nickel price on the London Metal Exchange (LME) closed at $16,356 a tonne, up 3.2% from the year-to-date low of $15,850 hit on February 7.
This is the lowest price since April 2021, and LME nickel prices have been in a sustained downward trend since reaching $33,575 per tonne on December 8, 2022.
The increase in Indonesian supply has depressed nickel prices as the Southeast Asian country has successfully ramped up production of refined and semi-refined nickel, largely on the back of the original nickel export ban, which in turn has led to massive investment in new processing plants by China.
That's the problem with nickel.
How to segment the market
Currently, about 65% of nickel is used to make stainless steel, but this proportion is expected to decline in the coming years as more of the metal is used to power batteries needed to switch to electric vehicles and renewable energy generation.
Most of the nickel produced in Indonesia is emissions-intensive, relying mainly on coal for electricity in the energy-intensive smelting process.
What Australia needs is a fragmentation of the global nickel industry that separates the production of nickel with less climate impact from the non-production of nickel with less climate impact.
In other words, more environmentally friendly nickel commands a price premium over the dirtier metal produced in Indonesia and processed in China into products such as batteries.
The question is how to effectively achieve a two-tier market, and who will pay the inevitable price premium?
The London Metal Exchange seems in no hurry to implement a two-tier system for nickel or other metals.
End-users of energy transition metals, such as automakers, also seem reluctant to go down this road.
From their point of view, this is understandable. In the showroom, it can be a very difficult task to convince potential customers to pay a few thousand dollars more for an identical car made of "green" metal.
That means governments, especially in the developed West, may have to push for the change.
Australia's move to support its nickel miners is a short-term solution that needs a long-term one.
Aware of this, King said Australia was "in important discussions with our international counterparts in the United States, Canada and the European Union to ensure that the high standards applied to the mining and production of nickel and other key minerals in Australia are reflected in future pricing in international markets".
The quote is the government's claim to set up a system of regulations, taxes and carbon costs to drive up costs for Australia's dirtier mining competitors and reduce the influence of Chinese manufacturing.
At some point, the Western world will have to decide whether it really wants to build an energy transition supply chain that has little impact on the climate and largely excludes China.
If it does make that decision, then it has to figure out how to pay for it.
Eventually, it will fall to the consumer, one way or another. The trick is to either convince the public that it's a good thing, or do it in a way that they won't perceive.
