The biggest nickel producer on the ASX says Australia is no longer competitive in the sector and its miners will never attract a so-called green premium for their product.Nickel Industries managing director Justin Werner issued the dire warning with more than 1000 jobs in the balance in Australia after a plunge in nickel prices and forecasts Indonesia will flood the market with supply for years to come.
Sydney-based Nickel Industries operates mines and has a growing footprint in downstream processing plants in Indonesia in partnership with Chinese billionaire Xiang Guangda, the founder of Tsingshan Holdings, one of the world’s largest nickel producers.
“We are in a very low-price nickel environment, and it is exposing the unfortunate truth that from a nickel perspective, Australia isn’t competitive any more,” he said.Ratings agency Fitch said it was further lowering its 2024 nickel price forecast to $US20,000 a tonne – down from $US20,600 – based on the supply glut, weak demand from China, and a limited growth outlook in other major markets.
Nickel Industries produced no nickel five years ago. Now, the company is fast approaching 140,000 tonnes a year in Indonesia, which is coming to dominate global supply of the metal needed in stainless steel and battery manufacturing.By comparison, BHP – which employs about 2500 people at its Nickel West operations in Western Australia, and sounded a warning on the dire state of the local industry in December – produced 80,000 tonnes last financial year.Green premium ‘never existed’Mr Werner said Indonesia had been a huge winner in terms of downstream investment, jobs and wealth creation after banning the export of unprocessed nickel ore under a policy that is now the source of tension between Canberra and Jakarta.
The Albanese government is backing a pricing structure that distinguishes between nickel produced under high environmental, social and governance standards in Australia, and what Andrew Forrest calls dirty nickel produced in Indonesia. Wyloo Metals, the private nickel producer owned by Dr Forrest and Nicola Forrest, paid $760 million for WA’s Mincor last year. It and others are pushing for the London Metal Exchange to distinguish metal produced under higher ESG standards.Mr Werner described that suggestion as a pipedream based on overblown claims about the ESG qualities of Australian nickel sulphide players compared with nickel laterite producers in Indonesia.“I think where Australian players have come undone is that a lot of projects predicated their financials or the economics on some sort of premium for ‘green’ nickel,” he said. “It doesn’t exist. It is never going to exist.“We’ve met with numerous car makers, and they all say the same thing, ’we need cheap nickel.“They are all trying to drive down the cost of their electric vehicles to pick up market penetration, so are pretty forthright in saying they are not going to pay a green premium.”
Mr Werner said battery and carmakers were interested in ESG and traceability, and showing a willingness to invest in Indonesia where technology advances were bringing down the carbon emissions from high-pressure acid leach plants used for processing.Ford last year joined Vale and Zhejiang Huayou Cobalt as a partner in a $US4.5 billion ($6.7 billion) nickel plant expected to be in operation in 2026, while South Korea’s LG Energy is building a $US3.5 billion smelter, and Hyundai has broken ground on an electric vehicle plant in Indonesia.Mr Werner said these investments, and others from big European players such as BASF and Eramet, showed how far Indonesia’s nickel industry had come, while Australia was in trouble on the back of high costs and a dearth of big recent nickel sulphide discoveries.“In the nickel space, we think of Indonesia as what WA is in iron ore or what the Middle East is in oil and gas,” he said.“It has got the biggest endowment of resources. God determines geology, not governments.
The laterite basically sits at surface and there are millions and millions of tonnes. It is really about the size and scale of what you can do. In five years, we’ve gone from nothing to 140,000 tonnes a year, and still growing.”Mr Werner said while it was a tough time for Australian nickel producers, it was all about “where you sit on the cost curve”.“A sulphide mining operation in Australia has a significant amount of sustaining capital expenditure and other high costs in continuing to go deeper with an underground mine,” he said.Dr Forrest is staring down the barrel of a second disastrous venture into nickel after the debacle around Anaconda Nickel, which almost collapsed, earlier in his career. He declined to comment when asked about the nickel sector.
Big job lossesHundreds of jobs were lost this week when administrators, citing weakening prices, put Panoramic Resources’ nickel operations in WA’s far-north into care and maintenance.Separately, IGO Limited warned in December that it may have to write off the $1.3 billion it paid for the Western Areas nickel assets in 2022 as it started shedding jobs at its troubled Cosmos nickel project.Nickel Industries sells the nickel pig iron it produces to Mr Xiang’s Tsingshan, but is aiming to boost production of class 1 nickel deliverable to the London Metal Exchange.Nickel Industries is due to start supplying nickel matte to Glencore this month in what marks its first sales to a Western customer, and is in talks with battery and car makers about off-take deals or partnerships as it boosts class 1 nickel production.It is fully funded for its share of building the Excelsior HPAL plant in Indonesia, which is touted as the first in the world that will be able to produce mixed hydroxide precipitate, nickel cathode and nickel sulphate, on the back of raising $943 million through a placement to Indonesian conglomerate United Tractors, and $US400 million loan from Indonesian bank BNI.
Resources Minister Madeleine King told The Australian Financial Review this week there was no doubt that Indonesia’s ban on the export of raw nickel had attracted enormous foreign investment to build greater capacity in Indonesia, affecting Australian miners.She indicated the ban had distorted the market, with China subsequently investing tens of billions of dollars in refining assets.Mr Werner said the policy, although unpopular with Australia and free trade advocates, had been a bonanza for Indonesia.“In 2013, Indonesia exported about 600,000 tonnes of unrefined nickel ore and the value of those exports was $US1 billion. Two years ago, 600,000 tonnes of nickel was exported in value-added products and the value of those exports was about $US15 billion.”
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