Companies
Mining
Nickel miners thrown ‘sovereign’ lifeline
Jacob Greber, Peter Ker and Brad Thompson
Feb 16, 2024 – 6.45pm
The Albanese government is moving to directly back WA’s faltering nickel miners, potentially via Labor’s looming US-style green industry initiative, even as Resources Minister Madeleine King vowed she would not bail out “speculators” smashed by a glut of the critical battery metal from Indonesia.
Fears of a collapse in the nation’s “sovereign capacity” prompted Ms King on Friday to include nickel on the government’s official critical minerals list, opening the door to miners led by BHP to tap a $4 billion federal loan facility as well as foreign export credits in allied nations such as Japan and Korea.
“No silver bullet” for nickel crisis, says Madeleine King. Christopher Jue
Labor is also understood to have deployed US ambassador Kevin Rudd, who is active in talks with Andrew Forrest’s private company Wyloo and others, to take on the Chinese-owned London Metals Exchange.
The dominant global pricing agency is under attack for failing to distinguish between nickel produced under high ESG standards in Australia and what the billionaire calls “dirty nickel” from Indonesia that is flooding the market.
“The government doesn’t have to hand [over] hundreds of millions or billions of dollars cash to inject into this industry,” Ms King told AFR Weekend. “But we’ll look at other levers.”
The darkening outlook for one of Australia’s cornerstone future “green energy technology” commodities – and a major source of jobs and incomes in the west – came as Prime Minister Anthony Albanese declared Labor was planning a “think big” multibillion-dollar industry scheme akin to Joe Biden’s $624 billion IRA behemoth.
To become a renewable energy superpower, “the government has to be a partner in this, not just an observer”, Mr Albanese told an audience late on Friday in Newcastle, where the local coal industry is set to become a big loser in the transition.
Triggered by BHP’s decision this week to write down its Nickel West project, Friday’s decision to upgrade nickel from a “strategic” mineral to the “critical” category came nine weeks after Ms King finalised Labor’s list following months of consultation,
BHP is mulling whether to spend close to $1 billion on a refurbishment of its Kalgoorlie nickel smelter at a time when slumping nickel prices have forced the company to consider a wholesale closure of its nickel business.
BHP fetched $US24,021 ($36,838) a tonne for its nickel in 2022-23 but the LME price has plunged in the past 12 months to about $US16,000 a tonne.
Long-term “nickel demand will remain”, Ms King said, but a glut of shipments from Indonesia and China combined with faltering demand for EV batteries on the world market meant some of the sector’s smaller miners would be mothballed “until prices do indeed recover a few years down the track”.
“We can’t subsidise speculation, but we do need to make sure sovereign capacity is maintained. It would not be a good thing for Nickel West to go into care and maintenance because it is hard to get these things going”.
‘Flat-footed’
Industry leaders and the federal opposition questioned why it took Labor so long to act after ignoring previous lobbying to have nickel upgraded to critical, particularly as mines had started shutting down months ago.
The December call to exclude nickel came just days after BHP nickel boss Jessica Farrell warned operations in WA employing thousands of workers were at risk, telling The Australian Financial Review at the time: “We know this is creating a lot of uncertainty for the many people who work in Australia’s nickel industry, and we continue to communicate with our people and across the sector as we take action to address these challenges.”
The Association of Mining and Exploration Companies chief executive, Warren Pearce, said including nickel made sense and signalled the government’s intentions to deliver financial support to an industry hurting badly.
“Clearly, there is no single government measure that will provide an immediate fix, but there is definitely a need for intervention,” he said.
The Chamber of Minerals and Energy of WA said the step was positive but “more actions were needed”, including pushing trading partners to back Australia’s higher-priced but cleaner and more ethical critical and battery minerals supplies.
Opposition resources spokeswoman Susan McDonald said: “Despite calling for nickel to be included … in June last year, it has taken Labor an unfolding crisis to act. It may be too little, too late for the thousands of Australian workers at risk.”
WA Premier Roger Cook told Perth radio the state government could do some of the heavy lifting via royalties relief. “But when it comes to big downstream processing players such as smelters and refineries, that’s beyond our pay scale, and we really need other levels of government to become involved,” he said.
BHP declined to comment on Friday.
Ms King said the government was speaking to BHP, AMEC and CME on the best way to manage the problem.
“I’ll be honest … this is not a silver bullet that anyone’s looking for,” she told AFR Weekend.
The minister signalled the government was willing to take on the Chinese-owned LME and was enlisting support in the US.
“The LME has its own commercial interests, which might not be the same as our strategic interests, or even our ambition to make sure what we make is as clean and green as possible through our high ESG and worker safety standards,” Ms King said.
“We’ve been working very actively with the US, and I’ll be meeting with my counterparts in Canada next month, another mining country, to progress the accounting for these high standards in international markets.”
Mr Rudd has been active in the talks and is understood to have discussed the plight of the nickel industry with Dr Forrest, who is shutting down his WA nickel mines in May.
In the meantime, Ms King said the focus was on helping with BHP’s “decision-making process”.
“That’s going to take a number of months and during that time we will hope to be able to talk to them a bit more fully about what’s possible”.
Labor expects the global price to stay relatively low through this year, and probably for several years to come until the surplus of nickel in the market is absorbed. “In the meantime, this puts further Australian nickel operations at risk,” Ms King said.
The minister has the discretion to review the critical minerals list at any time if there are significant changes to technology, trade, domestic capacity or geopolitical developments.
Since the list was updated on December 16, six operating nickel facilities have either announced reduction in operations or gone into care and maintenance.
Asked whether more assistance might flow via the prime minister’s green industry policy initiative, Ms King said: “That’s being worked on in the context of budget discussions. Commodities like nickel will be needed for our green energy future, so it will be under consideration, I’m sure.”
(20min delay)
