France’s nickel production is significantly lagging behind its Indonesian and Chinese counterparts, and must be both refinanced and restructured to meet EU critical raw materials independence goals, a new government report reveals.
The report, published on Tuesday (1 August), looks at the enduring negative results of key French metallurgy conglomerates, attributing the lag to nickel’s price volatility, technical problems which have led to an under-optimisation of factory plants’ capacities, and rising energy and labour costs.
Almost all French nickel extraction and refining takes place in New Caledonia, a French territory off Australia’s East coast, which is home to 10% of the world’s nickel resources. Three key players dominate the market: Société Le Nickel (with a majority stake held by French mining mogul Euramet), as well as state-owned Koniambo Nickel (with 49% stake by Swiss Glencore) and Prony Resources Nouvelle-Calédonie.
“Unprofitable as they are, these companies depend on both private and public funding to carry out their activities,” the report outlines, warning that a complete breakdown of the sector is possible if nothing is done.
EU critical raw materials independence
The French government’s evaluation comes amid a broader EU-level conversation over ensuring security in the supply of critical raw materials in the push for the green and digital transitions, spurred on by the growth of EU-based gigafactories – large-scale battery manufacturing plants – including four in France.
In March, the European Commission unveiled a new regulation, setting targets for the production, refining and recycling of key raw materials, including nickel.
Nickel, used for battery production, is deemed both ‘critical’ and ‘strategic’ to the EU’s efforts to decouple from China.
“Both China and Indonesia dominate the nickel value chain,” the French report reads. It adds that up to 90% of all Indonesian mines and refining plants are controlled by Chinese actors, making them the evident player to beat on the world’s market.
As EU demand for these materials ramps up, with an increased focus on domestic production, the French government estimates that French nickel production could meet 85% of all French gigafactory needs and 15% of overall EU demand, if the sector is sufficiently restructured.
Recommendations include metallurgy conglomerates vertically integrating with other EU battery production actors further up the value chain, and the loosening of export bans that apply when nickel has been extracted in specific, ‘high potential’ areas.
The bans originally existed to quell exports, and favour local use that could benefit the island’s economy directly. The report suggests lifting these bans temporarily under certain conditions, thus boosting raw nickel exports and mining revenues.
Reducing production – and especially energy – costs is also critical to face Asian competition. Unlike the French mainland, nuclear power comprises none of New Caledonia’s energy mix. A radical overhaul of the energy mix, with a growing use of liquified natural gas (LNG) and liquefied petroleum gas (LPG), is currently taking place – and ought to be sped up, the report argues.
Additionally, the report calls for a review of the governance framework that applies to publicly-owned companies, calling for greater involvement of local and regional government entities through relevant regulation and an effective fiscal policy so the benefits of exports and nickel refining can be redistributed across the local population.