What’s behind the collapse in the price of nickel and how can the industry survive?

What’s behind the collapse in the price of nickel and how can the industry survive?

Subject: Geography

Section: Eco geography

Context:

• Australia’s nickel industry has received significant federal support and temporary relief from royalty payments following a drastic drop in global nickel prices, which posed a threat to thousands of jobs.

Details:

• The metal’s price plummeted from $50,000 in 2022 to $16,400 per tonne, largely due to an increase in supply from Indonesia, particularly from Chinese-operated mines.
• Australia included nickel in the Critical Minerals List.

China is the largest processor:

• China dominates the global processing of crucial minerals such as lithium, cobalt, nickel, and graphite, which are vital for battery production and the future of clean-energy technologies.
• Holding the largest market share, China processes 35% of the world’s nickel, along with an additional 15% processed in Indonesia.
• It also controls about 80% of rare earths processing, 90% of lithium, and 70% each of gallium and germanium.
• The country’s low processing costs and competitive labor market provide it with a significant advantage, positioning suppliers in a role where they must accept market prices rather than influence them.
• Australia and Indonesia are among the top holders of nickel reserves globally, each possessing around 21 million tonnes.

China helped fund the oversupply:

• Australia’s mineral sector has faced challenges due to China’s strategy of investing in Indonesian mines to increase output and keep prices low, effectively creating an oversupply.
• In response, Australia is trying to diversify its processing capabilities by forming critical mineral partnerships with countries like India, Japan, Korea, the United States, and the United Kingdom.
• However, these efforts are threatened by potential strategic countermeasures, such as export bans by China on processed commodities like Gallium, Germanium, and rare earths, or actions to further increase oversupply.
• Despite being a leading producer of critical minerals essential for lithium-ion batteries and having superior environmental, social, and governance (ESG) standards that attract investment, Australia’s lack of refining capacity means it often has to sell off the critical minerals it mines as byproducts, highlighting a significant gap in its ability to fully capitalize on its resources.

China’s stronghold will be hard to escape:

• Australia emphasizes the importance of establishing a domestic processing facility. This facility would allow Australia to offer minerals processed locally, adhering to higher environmental, social, and governance (ESG) standards, thus providing a competitive advantage over minerals processed in other regions.

Nickel Ore Distribution in India

• The Sukinda valley in the Jajapur district of Odisha has significant occurrences of nickeliferous limonite.
• It appears as oxide here.
• Nickel occurs in sulphide form alongside copper mineralization in Jharkhand’s east Sighbhum district.
• Furthermore, it has been discovered in association with uranium deposits in Jaduguda, Jharkhand.
• Nickel is also found in significant quantities in Karnataka, Kerala, and Rajasthan.

Nickel Distribution in World:

• Indonesia is the world’s largest producer, followed by the Philippines and Russia. Australia has the highest reserves, followed by Brazil, Russia, and Cuba.

Source: DTE