{"id":81789,"date":"2024-02-21T23:31:12","date_gmt":"2024-02-21T23:31:12","guid":{"rendered":"https:\/\/globalroadtechnology.com\/\/?p=81789"},"modified":"2024-02-21T23:31:12","modified_gmt":"2024-02-21T23:31:12","slug":"australian-nickel-industry-relief","status":"publish","type":"post","link":"https:\/\/globalroadtechnology.com\/australian-nickel-industry-relief\/","title":{"rendered":"Australian Nickel: An Industry in Crisis"},"content":{"rendered":"

The problems facing Australian nickel miners and producers continue to grow as a global supply glut deepens. Hot off the press, however, is news that there may be some meaningful relief in the form of tax credits on the way for the industry.\u00a0<\/span><\/p>\n

On the tail of a year-long price decline in 2023, nickel concentrate prices are at rock bottom, trading at around $16,000 per tonne, or well below break-even for many Australian producers.\u00a0<\/span><\/p>\n

Driven by a massive supply increase from Indonesia \u2013 after the country banned nickel ore exports in 2020 to drive the domestic downstream processing industry \u2013 global supply now far exceeds demand. And while Australia and Indonesia each have a fifth of the world\u2019s nickel reserves, that\u2019s where the similarities end.<\/span><\/p>\n

The number of nickel smelters in Indonesia has jumped from just 15 in 2018 to 62 as of April 2023, with 30 more under construction and many more in the planning phase.\u00a0<\/span><\/strong><\/p>\n

Primarily backed by Chinese capital, nickel smelters are popping up in Indonesia at an unprecedented rate, allowing the country to increase its concentrate supply capacity by up to 50% per year.\u00a0<\/span><\/p>\n

Experts suggest that between 2022 and 2029, Indonesia will supply 75% of the world\u2019s nickel carbonate, with its total mine production now hitting 1.6 million tonnes out of a 3.3 million tonne global market.\u00a0<\/span><\/p>\n

The country has 5 million tonnes of nickel processing capacity in planning, leading experts to suggest that the supply glut and lowered prices will be around for some time.\u00a0<\/span><\/p>\n

But what role does nickel play in the world, and why has Australia added it to the Critical Minerals list?\u00a0<\/span><\/p>\n

Why Does Nickel Matter to Australia?\u00a0<\/span><\/strong><\/p>\n

Before the rise of electric vehicles (EVs) and, specifically, rechargeable lithium-ion batteries, nickel was mainly used as an alloy in stainless steel. This is still the case today; however, the industry has reached a tipping point where EV technology will soon provide the lion’s share of demand.\u00a0<\/span><\/p>\n

With this in mind and watching the domestic industry flail, the Australian government has decided to act. Adding nickel to the Critical Minerals list has opened the door to billions in funding and grants for producers while a direct tax credit for nickel producers is now confirmed.\u00a0<\/span><\/p>\n

The same relief may also apply to lithium if the downward pressure on prices continues. The move to support producers comes after a recent industry and governmental roundtable established the issues and pinpointed the required assistance.<\/span><\/p>\n

Australia\u2019s biggest company, BHP, also warned the government that it was considering closing down its nickel operations in Western Australia, putting 3000 highly-paid jobs on the chopping block.<\/span><\/p>\n

The Association of Mining and Exploration Companies (AMEC) has proposed a nickel production tax credit of at least 10% to reduce costs and prompt investment in downstream processing.\u00a0<\/span><\/strong><\/p>\n

Ideally, the tax credit would ease the cost of production of value-added critical minerals, including labour, utilities, chemical inputs, and maintenance. Andrew Forrest\u2019s Wyloo has endorsed AMEC\u2019s proposal, while Forrest described the current crisis as reflecting an unfair playing field, particularly on the environmental front.\u00a0<\/span><\/p>\n

\u201cIf we are just pricing nickel at an economic cost alone, then what will happen if we ignore the environment and don\u2019t apply environmental responsibility to critical minerals,\u201d Mr Forrest said.<\/span><\/p>\n

\u201cYou\u2019re going to find that, say, Indonesia will only deal with China because Chinese-backed companies will come straight in, and they will do what is happening in Indonesia right now, which is wiping out terrestrial ecosystems, dumping all the waste into the ocean, wiping out marine ecosystems, wiping out the sustainability of communities which have been there for centuries and, \u2018oh, that\u2019s all OK because we\u2019re just going to pay a dollar-price for it.\u201d<\/span><\/p>\n

Where Does This Leave Australian Nickel Miners?\u00a0<\/span><\/strong><\/p>\n

As we\u2019ve seen, Australian nickel producers face an uphill battle to even compete with Indonesia\u2019s dominance. Nickel producers in the Muslim nations also enjoy tax-free operations for up to 20 years. Yet, while differing tax and environmental standards are part of the problem, Australia must improve its downstream processing of critical minerals to capture added value.<\/span><\/p>\n

The good news is that policies supporting this are starting to appear, although more is needed for local nickel miners.<\/span><\/strong><\/p>\n

BHP CEO Mike Henry stated that despite representing a small part of the business, Nickel’s market challenges in the past 12 months have resulted in impairment and a potential move into care and maintenance. \u201cWe think soft prices will persist for some time, potentially until the end of this decade, at which time we\u2019ll see the market come back into balance, and things will look more positive for nickel again,\u201d he said.<\/span><\/p>\n

\u201cBut there are 17 million Australians who depend upon BHP, either directly as shareholders, or indirectly through superannuation funds, for a successful and high-performing BHP.\u201d<\/span><\/p>\n

\u201cThat creates a real sense of accountability on our part, to ensure that we\u2019re taking the right decision, taking into account a range of considerations, both shareholder and other stakeholders, and we\u2019re in that process as we speak.\u201d<\/span><\/p>\n

In response to BHP\u2019s comments, WA\u2019s premier, Roger Cook, announced a 50% royalty relief program, payable when the average price of nickel concentrates dips below $US20,000 per tonne.\u00a0<\/span><\/p>\n

Summary and Outlook for Nickel<\/span><\/strong><\/p>\n

While the critical minerals battle heats up among global producers, encompassing nickel in the fire, Industry bodies in Australia are encouraging policies similar to those in the US. Touted as an incredibly successful venture, the Inflation Reduction Act (IRA) has attracted billions in investment from around the globe into American clean energy and renewable infrastructure.<\/span><\/p>\n

Prime Minister Anthony Albanese now has his sights set on a similar policy angle.\u00a0<\/span><\/strong><\/p>\n

Downstream or value-added mineral processing must take centre stage in Australia\u2019s clean energy push. This, in turn, will help to support domestic mining and production industries without resorting to the quick fix of tax credits, which must ultimately be repaid.\u00a0<\/span><\/p>\n

By focussing on quality rather than just quantity, Australia can leave behind the legacy of raw material exports, now under heavy competition, and instead enter the market further up the value chain, benefitting all parties.\u00a0<\/span><\/p>\n

\u00a0<\/span><\/p>\n

Dust suppression is a critical issue in the world of mining and resources.<\/strong><\/p>\n

Learn more about GRT\u2019s industry-leading and IoT-connected\u00a0SMART Dosing Units<\/a>, and discover how we\u2019re driving better dust suppression solutions for all!<\/strong><\/p>\n

If you\u2019d like to talk with an expert, simply\u00a0contact us<\/a>!<\/strong><\/p>\n

Your feedback is important to us.\u00a0<\/strong><\/p>\n

If you enjoyed reading this Global Road Technology industry update and found it informative, please let us know by leaving a\u00a0REVIEW<\/a><\/strong><\/p>\n

 <\/p>\n

References:<\/span><\/p>\n

https:\/\/asia.nikkei.com\/Spotlight\/Market-Spotlight\/Nickel-surplus-seen-widening-in-2023-as-Indonesian-output-soars<\/span><\/a><\/p>\n

https:\/\/www.afr.com\/politics\/federal\/labor-plans-tax-credits-to-help-nickel-miners-20240218-p5f5tc<\/span><\/a><\/p>\n

https:\/\/www.abc.net.au\/news\/2024-02-20\/bhp-ceo-mike-henry-half-year-results-nickel-iron-ore-china\/103488554<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The problems facing Australian nickel miners and producers continue to grow as a global supply glut deepens. 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