Shutdown of ‘symbolic’ nickel plant compounds New Caledonia’s economic woes

The French territory’s current political crisis is aggravating long-running problems in its struggling nickel industry.

Harry Pearl
2024.09.06
Brisbane

The Koniambo Nickel SAS (KNS) plant is seen at the Vavouto site in Voh, in the French Pacific territory of New Caledonia, on Aug. 30, 2024.

 Delphine Mayeur/AFP

For the past 13 years, engineer Didier Bule has maintained the machinery at the heart of New Caledonia’s Koniambo nickel plant, a symbol of economic empowerment for the French territory’s indigenous Kanak population. 

But last weekend, the smelter’s furnaces were switched off – leaving about 1,000 workers at Koniambo Nickel SAS (KNS) out of a job. 

After years of operating without a profit, Swiss mining giant Glencore announced in February it would suspend production and sell its stake in the joint venture with Kanak-owned Société Minière du Sud Pacifique SA (SMSP). Bule is part of a 200-strong transition team that will stay on until October while talks with potential investors continue. 

“It has been very difficult for us,” the 37-year-old told BenarNews. “I was there when we started importing the equipment from China and Malaysia, so we have seen the plant built piece by piece. Now we have seen all the equipment being turned off one by one.”

The plant’s mothballing is a setback for North Province – a relatively poor region governed by the pro-independence PALIKA (Parti de Libération Kanak) – and another sign of trouble for New Caledonia’s nickel-dependent economy. 

Attempts to find a new investor for Glencore’s 49% stake have coincided with New Caledonia’s worst civil unrest in decades. Damage from riots that erupted in the capital Noumea in May is estimated to have caused 1.2 billion euros (U.S. $1.3 billion) in losses and left 35,000 people jobless, New Caledonia’s congress has said. 

The unrest was triggered by the French government’s backing of electoral roll changes that would have enfranchised newer French arrivals. Pro-independence groups said this would have diluted the voting power of Kanak people.

Though the electoral changes were shelved ahead of French National Assembly elections in late June, tensions remain high.

Symbol of ‘rebalancing’

Analysts say New Caledonia’s current political crisis is exacerbating long-running problems in the nickel industry.

“Koniambo – like many nickel refiners in New Caledonia – has long been beset by uncompetitive cost fundamentals, especially as relatively cheaper production from Indonesia has expanded,” said Will Talbot, principal analyst for nickel and cobalt at Benchmark Mineral Intelligence. 

“The French government has historically supported this industry but many domestic producers have struggled, particularly during the recent period of unrest.”

An employee hands in his badge at the security post on the last day of work at the Vavouto site of the Koniambo Nickel SAS (KNS) plant in Voh, in the French Pacific territory of New Caledonia, on Aug. 30, 2024. [Delphine Mayeur/AFP]

New Caledonia, located roughly halfway between Australia and Fiji, was the third-biggest producer of nickel last year and holds the world’s fifth largest reserves, according to the U.S. Geological Survey. 

Nickel accounts for about 20% of the South Pacific archipelago’s GDP and 90% of exports, depending on the year.

The metal has been mined in New Caledonia since the 1860s, but the sector was for decades dominated by the French companies while the Kanak population was excluded.

When the Koniambo nickel smelter was inaugurated by former French President François Hollande in 2014, it was seen as emblematic of the “economic rebalancing” policies agreed to under the Noumea Accord in 1998.

The policies were designed to address colonial-era inequalities that divided the majority-Kanak North Province and the wealthy, loyalist South Province.

Academic Matthias Kowasch, an expert in mining governance in New Caledonia, said the Koniambo smelter had “symbolic value” for Kanak people.  

“Koniambo, including a garnierite mine and a processing plant, is seen as an instrument for economic emancipation and, at a later stage, for eventual political independence from France,” said Kowasch, who is a professor at PH Steiermark and INN University.

“[But] without a new investment, Koniambo is not viable, which has and will have consequences for employees, subcontracting companies, and restaurants.”

Rescue package

The French government on Wednesday announced an additional 130 million euros (U.S. $144.2 million) in aid for critical public services and benefits in New Caledonia, bringing total assistance to 400 million euros since the unrest began.

But the figure falls well short of what’s needed to get the economy back on track.

In late August, the New Caledonian congress passed a resolution asking France for 4.2 billion euros over five years for reconstruction. It also requested “substantial commitment to rescue the nickel industry.”

“The recovery of the New Caledonian economy largely depends on the resumption of activity in the northern and southern plants and the continued operation of SLN (Société Le Nickel),” it said.

Like KNS, the territory’s two other nickel processors, SLN and Prony Resources, are also in financial strife and have cut back operations. 

The French government has proposed a state bailout package that would subsidize energy costs for the sector in exchange for reforms. But talks on the “nickel pact” have stalled amid souring relations between pro-independence parties and Paris.

In the meantime, with New Caledonia’s nickel industry at a virtual standstill, all workers like Bule can do is wait and hope. 

“Since the events happened in May, the job opportunities have been reduced drastically,” he said. “Now we have 1,200 more people looking for a job, so it will be very difficult come the end of October.”