Page 26 - Islands Business September 2023

New Caledonia New Caledonia

NEW CALEDONIA’S NICKEL SECTOR

FACES ENERGY CRUNCH

By Nic Maclellan new consortium in 2021. Prony Resources Nouvelle-Calédonie
(PRNC) has some provincial participation but a controlling
French President Emmanuel Macron’s recent visit to New interest is held by the commodity trading house Trafigura.
Caledonia highlighted the strategic importance of the vast The third smelter is located in the Northern Province,
reserves of nickel in the French Pacific dependency. where the population is majority indigenous Kanak. In 1990,
Speaking in Noumea, President Macron said: “Nickel creates the province’s development arm Société de Financement et
wealth for New Caledonia. It is also, and I say this forcefully d’Investissement de la Province Nord (SOFINOR) bought the
here, a major strategic resource for France and Europe, at a mining company Société minière du sud Pacifique (SMSP), to
time when we have embarked on a massive reindustrialisation develop new economic activity for the rural north. Today,
effort.” Koniambo Nickel SAS (KNS) – a joint venture between SMSP
During Macron’s visit, French ministers held a roundtable and the transnational conglomerate Glencore – operates the
with nickel industry companies. The roundtable discussed Koniambo smelter at Vavouto.
current challenges facing the crucial economic sector, Despite current economic woes and industrial disputes,
especially rising energy costs, industrial disputes and debt SLN remains a key employer in New Caledonia, with staff
burdens facing major producers like Société Le Nickel (SLN). at mine sites and its ageing smelter, as well as affiliated
The meeting was also presented with a Finance Ministry report sub-contractors and trucking firms. But the company is in
on the future of New Caledonia’s nickel industry, prepared by dire economic straits and is seeking further French financial
the Inspection générale des finances (IGF). support. French taxpayers have already bailed out the
The IGF report outlines “the considerable challenges facing company through grants and loans – in Noumea last month,
metallurgical companies to become profitable, particularly President Macron said: “Since 2016, the French State has
in the context of the rapid emergence of other international granted nearly €700 million in loans to two plants (SLN and
industrial operators, located in particular in Indonesia, that Prony) and opened €540 million in guarantees.”
have advantages in terms of labour and energy costs.” During a visit to SLN’s Doniambo plant last March, French
New Caledonia’s main export markets for nickel ore are Overseas Minister, Gérald Darmanin said: “We see that the
in the Asia-Pacific region. But in a major speech on 26 July, smelter and its economic model does not work very well,
President Macron argued that nickel ore and metal is a vital despite the courage of the employees. But we will not give
resource for European interests, and “nickel must be taken any more money to the New Caledonian smelters until we
into account in European legislation on critical strategic have a thoughtful and well-designed industrial program.”
materials.” All three smelters now face a perfect storm, with soaring
The IGF study highlighted a series of proposals for the future energy costs, competition from Indonesia, and shifting
of New Caledonia’s resource sector: “Shift production to the markets that affect debt levels, productivity and production.
battery nickel market to serve the European market. Rely on New Caledonian producers all look towards the El Dorado of
less carbon-intensive energy to reduce energy costs and be massive demand for nickel in electric vehicle batteries in the
able to compete with other industrial operators, especially 2030s, but face fierce competition between Europe and Asia
in Indonesia, which benefit from much cheaper, subsidised for the islands’ strategic resources.
energy and labour costs five times lower than that of New
Caledonia. In the same objective of profitability, the mission Energy crunch
also recommends reforming the rules relating to export In Noumea, Islands Business spoke with Karl Therby,
controls and metallurgical geographical reserves.” Chairman and CEO of the Société minière du sud Pacifique
(SMSP). Therby said that for SMSP, “the future will be
Nickel smelters in crisis determined by decisions of the French State around energy.”
Beyond a number of businesses involved in mining and Russia’s invasion of Ukraine, subsequent economic
export of nickel ore – including SLN and smaller mining sanctions on Moscow and disruption of oil and gas markets
companies known as ‘les petits mineurs’ – New Caledonia have contributed to soaring global energy prices. These cost
hosts three nickel smelters. Two are located in the Southern spikes threaten all New Caledonian operations in energy-
Province and one in the north of the main island Grande Terre. intensive nickel production.
The ageing Doniambo smelter in the capital Noumea is run KNS runs its own power plant in the Northern Province,
by SLN, the local subsidiary of the French corporation Eramet. but SMSP’s CEO explained that “last year at Koniambo, it
SLN was founded in 1880, but today its parent company has was €200 million for energy costs – it’s crazy. We made some
significant involvement from the French State, through the calculations last year, that even if we were to produce 60,000
government’s Strategic Investment Fund. Another smelter at tonnes of nickel a year, with the cost of energy, we’re still
Goro, built by the Brazilian corporation Vale, was sold to a losing money. You just can’t work like that.”

26 Islands Business, September 2023