Australia threw a lifeline at its strained nickel industry, but offered a solution that was more of a stopgap measure than a necessary major surgery to turn the global nickel industry green and dirty.
Australia's Resources Minister Madeleine King added nickel to the list of critical minerals, a move that gives the industry access to a portion of the federal **4 billion Australian dollars ($2.7 billion) funding aimed at promoting minerals critical to the energy transition.
"International nickel prices are expected to remain relatively low until 2024 and likely to remain for several years until the nickel surplus in the market is corrected," Kim said in a Feb. 16 statement.
At the same time, this puts more nickel mills in Australia at risk"She added that since December, six nickel mills in Australia have either announced production cuts or entered the care and maintenance phase.
Australia is the world's fifth-largest producer of nickel ore, and has recently made most of the industry's businesses unprofitable.
BHP Group, the world's largest mining company, said Feb. 15 that it would record a $2.5 billion non-cash impairment charge on its nickel operations in Western Australia.
The London Metal Exchange (LME) global benchmark nickel price closed at US$16,356 a tonne on Feb. 16, down from a year-to-date low of US$15,850**3 hit on Feb. 72%。
This is the lowest since April 2021** and the LME nickel price has been in a continuous** trend since reaching US$33,575 per tonne on 8 December 2022.
The increase in Indonesia** has depressed nickel prices as the Southeast Asian country has managed to ramp up refined and semi-refined nickel production, mainly supported by a ban on raw nickel exports, which in turn has led to massive Chinese investment in new processing plants.
That's the problem with nickel.
How to segment the market
Currently, about 65% of nickel is used to make stainless steel, but this proportion is expected to decline in the coming years as more and more metals are used to drive the shift to electric vehicles and batteries needed to generate electricity from renewable sources.
Most of the nickel produced in Indonesia is emissions-intensive and relies heavily on coal-fired power generation in the energy-intensive smelting process.
What Australia needs is a fragmentation of the global nickel industry, separating the production of nickel with a lower climate impact and not producing nickel with a lower climate impact.
In other words, more environmentally friendly nickel needs to command a premium compared to a more polluting metal produced in Indonesia and processed into products such as batteries in China.
The question is how to effectively achieve a two-tier market, and who will pay the inevitable premium?
The London Metal Exchange (LME) does not seem to be in a hurry to implement a two-tier system for nickel or other metals.
End-users of energy transition metals, such as automakers, also seem reluctant to go down this path.
From their point of view, this is understandable. In the showroom, it can be very difficult to convince potential customers to spend a few thousand dollars more for the same car made of "green" metal.
This means that countries, especially those in the developed West, may have to push for this change.
Australia's initiative to support its own nickel miners is a short-term solution that requires a long-term solution.
Kim is aware of this, saying Australia is in "important discussions with international counterparts in the US, Canada and the EU to ensure that the high standards used in the mining and production of nickel and other critical minerals in Australia are reflected in future pricing in international markets".
The above quote is a statement aimed at creating a system of regulatory, tax and carbon costs to drive up costs for Australia's more polluting mining rivals and weaken the influence of China's manufacturing sector.
At some point, the Western world will have to decide whether it really wants to build an energy transition chain that has little climate impact and largely excludes China.
If it does make that decision, then it has to figure out how to pay for it.
Eventually, it will somehow fall on the consumer. The trick is to either convince the public that this is a good thing or do it in a way they are not aware of.