NEWS

By Tom Robinson, Alys Marshall, and Tara de Landgrafft | ABC Rural | February 7, 2024, 4:52AM

• In short: Independent nickel analysts are warning against government assistance to aid the Australian nickel industry amid a price collapse.
• The price of nickel has fallen more than 43 per cent in the past year.
• What’s next? Both the WA government and the federal government are committed to further discussions with industry regarding what can be done to help.

As some of the biggest players in Western Australia’s critical minerals sector ask for urgent government support, analysts say the mineral’s deflated sector does not deserve a taxpayer-funded lifeline.

It is a critical mineral for renewable energy technology, but nickel prices have plummeted in recent months due to a glut in the market partly due to significant supply from Indonesia, the Philippines, and China.

This has led to closure at mines such as Andrew Forrest’s Wyloo Metals operation in the Goldfields, Panoramic Resources’ Savannah Nickel Mine in the Kimberley, and First Quantum’s Ravensthorpe nickel project, putting hundreds of jobs in the firing line across the state.

The state and federal governments held crisis talks last month with industry leaders and unions, with options such as royalty relief considered by WA Mines Minister David Michael.

This would mean the state government would charge companies less to operate mines in WA, with revenue decreasing as a result.

After the talks, federal Resources Minister Madeleine King said she would also take a proposed production tax credit — designed to encourage processing of minerals onshore — to treasury to be costed.

Lithium, which has seen a similar slump, was also represented at the meetings, but larger players, such as Mineral Resources, insist they can still turn a profit at current prices.

However, two analysts told the ABC the industry did not deserve intervention and taxpayer-funded support would be “quite unwarranted” and “not really the smart thing to do” due to the “boom and bust” nature of the industry.

To intervene or not to intervene?

Analyst Gavin Wendt said he felt the current downturn was part of the typical “boom and bust” cycle seen in the commodities sector.

“I don’t think you can … say industry should be competitive and should be determined by market forces in one instance, and then say, ‘Hey, our industry is a separate case and should have intervention,’,” he said.

“In the nickel industry, there’s nothing nefarious going on. It’s just the fact that the market is in oversupply with a lot of very low-cost nickel coming out of Indonesia.”

Analyst Peter Strachan said the past 12 to 18 months had seen the nickel industry balloon to an unsustainable level.

“It’s like tulip mania, really,” he said.

“We’ve seen so much [corporate] money just being chucked at the industry.”

Despite the cash injection, Mr Strachan said Australia’s lack of processing capacity meant our domestic raw product struggled to compete with cheaper processed metal out of Indonesia.

“Taxpayer support to the industry now, when you can’t actually see them digging themselves out of the situation in a two- or three-year time frame, would be, I think, not really the smart thing to do,” he said.

“It would be a folly for taxpayers to bail us out.”

‘Encouraging’ talks between industry and government

For industry leaders, last month’s meeting was a positive step due to nickel’s importance to the green transition and the level of capital invested in the sector.

Association of Mining & Exploration Companies acting chief executive Neil Van Drunen said talks were encouraging, and argued a tax credit would be a reasonable step forward.

“This would be to incentivise companies to go downstream and make those sorts of things that are crucial for batteries,” he said.

“Everyone wants to protect the jobs. Everyone wants to make sure that we keep the nickel industry going.”

A spokesperson for federal Resources Minister Madeleine King acknowledged the broader boom-and-bust cycle in mining.

However, the spokesperson said there were “unique circumstances” impacting lithium and nickel and producers should be able to compete fairly in international markets.

The minister’s office did not name a specific country or market, but it was understood markets such as Indonesia could supply cheap nickel as relatively low labour and environmental standards kept operational costs down.

“International prices for resource commodities are not set by the Australian government and these challenges cannot be solved by the Australian government alone,” the spokesperson said.

“Australian nickel and lithium resources are produced to high environmental, social, and governance (ESG) standards, meaning we offer more sustainable and ethical critical minerals than many of our competitors.

“We need to ensure all materials we mine and manufacture are as green and clean as they can be.”

A spokesperson for WA Mines Minister David Michael said the nickel industry was experiencing “significant headwinds”, but the government remained confident of its long-term future.

The spokesperson said workers affected by mine closures would be supported to upskill or reskill, and discussions about what the government could do to assist the industry were ongoing.

Source: ABC Rural