nickel, a more strategic than economic issue for France

In the run-up to the referendum on the independence of New Caledonia on November 4th, the question of the place of nickel in the local and French economy regularly comes up in the debate. The world's resources of "green gold", 25% owned by the archipelago, provide the territory with a developed industrial fabric. For France, even though this market represents only a small part of the national economy, this metal is indispensable for the manufacture of stainless steel, which makes it a strategic issue on the international scene.

Nickel, main resource of "Caillou"

For the "pebble" of the Pacific, the nickel economy accounts for nearly one fifth of gross domestic product and 90% of exports. Ranked this year as the world's fifth largest producer by the International Nickel Study Group (INSG), New Caledonia now exceeds production in Australia and Canada. The New Caledonian territory thus remains very dependent on the exploitation of this raw material, which accounts for nearly 90% of exports and represents one in five jobs.

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Société Le Nickel (SLN), a subsidiary of the French group Eramet, is the historical operator of ore, operating sites in the north and east. With nearly 55,000 tonnes of ferronickel produced each year, the industrial sector is the largest employer in the region. However, for some time, its results have weakened, aligning in particular six consecutive deficit-making years (-125 million euros in 2017). In addition, the SLN, which operates the Kouaoua deposit, has just emerged from a crisis and resumed its activity after months of blockage, during which some fifty young Kanaks blocked access to three sites to denounce environmental risks.

Long in a monopoly situation on the Caillou, the SLN is now competing with two international players. On the one hand, the joint venture Koniambo Nickel SAS, owned by the South Pacific Mining Company and the Anglo-Swiss group Glencore, is present in the northern province of the territory, led by the separatists. On the other hand, Brazil's Vale, the world's largest nickel producer, operates in the south. But his factory is a challenge. Indeed, its Goro industrial complex displays contrasting results and a lack of profitability. Under pressure from international badysts, group CEO Fabio Schvartsman said he will give himself until the end of the year to announce solutions to optimize the revenues generated by his factory.

Competition intensifies in a weakened market

With the collapse of the nickel price, divided by two between 2011 and 2016 and now standing at around 12,000 euros per tonne, as well as the arrival on the market of low-cost producing countries, the mining industry and metallurgy in New Caledonia is weakening. At the international level, supply and demand are constantly increasing, with the challenge now for the nickel industry in New Caledonia to post competitive costs against the countries that dominate the sector: China in particular, with its main suppliers are the Philippines and Indonesia. In fact, it is now these, alongside Brazil and Madagascar, which hold 70% of world production.

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In addition, the New Caledonian economy remains highly dependent on metal, a true mono-industry, with no real desire to diversify activities. While for many independents, nickel represents a strong argument, several experts say that this raw material, alone, would not allow New Caledonia to achieve economic independence. Nicolas Mazzuchi, expert in raw materials and researcher at the Foundation for Strategic Research, explains at Figaro that to achieve this, "the territory should have two-thirds of the world's nickel resources". He added that the archipelago could expose itself to "Dutch disease", an economic phenomenon consisting in too much exposure of the local economy to changes in the price of natural resources internationally.

France puts at stake its main mining resource

However, the mining sites of New Caledonia are recognized as the most promising in the world, due in particular to the quality of the extracted ore, particularly sought after by China. Thus, with the referendum on the independence of New Caledonia, France brings into play its main mineral resource, and thus its status as holder of an indispensable metal in many sectors.

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Although the sector is not particularly significant at the level of the French economy, nickel is the only French strategic raw material that is already exploited and available to France in large quantities. It is therefore a significant badet and a strategic metal, especially for the electronics sector where it is used in very large quantities. For Nicolas Mazzuchi, "nickel is ultimately for France an important key on issues of global strategy, especially with China, which is the world's largest consumer." In addition, the exceptional quality of Caledonian nickel, which justifies its high cost, represents a competitive advantage of excellence for niche applications. Regarding its future uses, the expert indicates that this nickel quality "could replace neodymium (magnet, the heart of the operation of a wind turbine, editor's note)," and thus "compete with China, which controls the global market. 'wind turbine".

In the event of independence, the future of nickel mining companies in New Caledonia will depend on the regulations that will be put into effect, either protectionist or open. And the new authorities will not be able to rely exclusively on this resource to ensure the prosperity of the country.