Green premium won’t save Australian nickel

Elouise FowlerMar 10, 2024 – 12.16pm

Mick McMullen says “the cost curve in nickel has fundamentally shifted down”. Trevor Collensnone

The boss of acquisitive copper producer Metals Acquisition says the nickel market has “fundamentally shifted” and it is unlikely the world’s largest buyer, China, will pay a “green premium” for the commodity.

Even if nickel miners could fetch a green premium, it may not be enough to make nickel mined outside Indonesia attractive, said Mick McMullen, who is scouring the globe for mines to add to his portfolio.

Mick McMullen says “the cost curve in nickel has fundamentally shifted down”. Trevor Collensnone

Indonesian nickel has flooded the market, crashing the price of the metal required for steel-making and batteries. The price slump has torn through Australian miners, which produce greener nickel than Indonesia but at a higher cost, sparking cuts to jobs and production.

Mr McMullen helmed the largest IPO on the ASX this financial year, dual-listing the group in February. The miner, which is also traded on the New York Stock Exchange, owns Glencore’s former copper mine in Cobar in Queensland.

Mr McMullen can acquire more mines thanks to a lending syndicate backed by foreign banks, but the economics of buying a nickel mine outside Indonesia in a tier one jurisdiction are tricky.

“The cost curve in nickel has fundamentally shifted down. And to buy an asset we need to be able to balance the cost curve,” Mr McMullen said.

Green premium not enough

Plus, he can’t see customers electing to pay more for green nickel based on his experience running a mine in the US state of Montana, which produced green palladium, a metal largely utilised by automakers.

“When I ran Stillwater in the US a decade ago we were getting a clean, green, made in the USA premium for our palladium, which was about 2 per cent on the price,” he said.

“That was selling to US and European car companies who actually cared about this sort of thing. That’s the quantum of premium you’re going to get. And so I doubt that’s enough to move the needle on nickel.”

The price slump has prompted calls from Australian miners and the federal government for the London Metal Exchange to introduce a separate market that only deals in “green” nickel, adhering to higher environmental standards than the commodity produced in Indonesia.

The LME, backed by Chinese interests, shot down this idea on Wednesday.

Copper shines

Meanwhile, Mr McMullen is advancing his hunt for copper mines because the fundamentals of the commodity – used in a variety of applications including conducting electricity – are sound.

He wouldn’t rule out investing in lithium but said he did not see it as attractive, citing price volatility in the market.

“Lithium went up eightfold. That’s the equivalent of copper going up to $US30 ($45) a pound. I can’t see that happening. When something goes up eightfold, it’s inevitable what’s going to happen afterwards, it’s going to go down, which is what is happening with lithium now.

“We’d like to grow the business, but we’re well-disciplined and we will not buy stuff for the sake of buying stuff and growing.”