Why there's no silver bullet for the nickel pickle facing the Albanese government

When miners first struck nickel in Western Australia’s dusty outback in the late 1960s, it kickstarted a rollercoaster ride that brought the likes of Harold Holt and Andrew Forrest to town.

So exciting was the revelation of nickel in Kambalda, 60 kilometres south of Kalgoorlie, the prime minister came to town to join the party.

“It is an important national asset,” Mr Holt declared from the Goldfields mine site in 1967.

Today it is seen as not only important but critical – due to its use in the batteries needed for the global energy transition.

Two years ago, the price of nickel reached a dizzying height of around $76,000 (US$50,000) per tonne.

Just last year, billionaire Andrew ‘Twiggy’ Forrest was spotted drinking beers at Kambalda’s local pub, the aptly named Nickel Bar, after his company Wyloo took over a major nickel producer in the region.

“Wyloo has targeted nickel sulphides as they are the greenest and cheapest option for battery manufacturing,” Mr Forrest said at the time.

“We are going to give the market a choice between clean nickel and dirty nickel.”

But for all the highs of this volatile commodity, the past 12 months have been a stomach-turning speed slide.

The price is now sitting around $24,300 ($US16,000) per tonne, and five WA nickel producers across the state have announced they are either scaling back operations or going into care and maintenance. Thousands of jobs are on the line.

Kambalda publican Steve Cole said locals were accustomed to the boom-and-bust nature of mining, and those affected by the downturn would hopefully be able to jump ship to one of the local gold mines.

“Some of the major gold mines around the area, if they are looking for experienced mining personnel, there is no better time to … recruit some of these guys that are doing it tough,” he said.

“Because they’ve got kids in the school and their wives are in town working and there will be some nervous tension around.”

But veteran market analyst Tim Treadgold said while the commodity had always been volatile, this trough felt slightly different to others.

“The price has gone down a lot harder and faster than anyone expected,” he told 7.30.

“I mean, off 40 per cent in 12 months is quite disastrous if you’re a nickel miner.

“The question is – will the price come back? And the answer is, not for a long time.

“I predict it will take three to four years.”

The price plunge has primarily been driven by a supply glut coming from Indonesia, where Chinese investment and government policies have seen production in the country surge.

Association of Mining and Exploration Companies (AMEC) CEO Warren Pearce also feared this time was different, due to the evolution of the critical mineral industry.

“It is different because it is an emerging industry,” he said.

“We are at the foundation point of a massive new industry that is quickly becoming one of the largest industries in the world and there is so much value there to be taken advantage of.

“We’ve got a foundation piece – we’ve got the minerals, we’ve got the mines. We should be able to leverage that into a better position downstream.

“If we can capture a good piece at the upstream and downstream end, then we will be able to grow it.

“If we miss that opportunity, [it] will be lost to us for a generation.”

A critical mineral 

The price downturn is worrying Goldfields businessman Ashok Parekh.

After 40 years of doing business in the mining region, he knows the commodity-coaster well.

But he said the most recent announcement by BHP that it was considering the future of its Nickel West operations was “very concerning”.

“I think it would be disastrous in relation to the Goldfields,” he said.

“Governments state and federally have got all the taxes from these companies when things are going well, but now they have to show some skin in the game – particularly in a downturn like this.

“Nickel has always been a big thing in the Goldfields, it has a history, we are very proud of it. And we don’t want to see that close down.”

After BHP announced its dire nickel situation last week, the federal government promptly announced it was adding nickel to the critical minerals list, which gives producers access to billions of dollars in federal funding.

It was welcomed by AMEC, which had been calling for this since mid-last year. But it does not guarantee any change in circumstances for those who have already made business decisions to press pause.

For its part, the WA government has announced royalty relief and is considering what further support could be provided.

AMEC has been lobbying for the federal government to consider providing Production Tax Credits for producers of critical minerals, including lithium – another commodity struggling with a price dip.

Mr Pearce said this would operate in a similar way to a United States government scheme and would encourage downstream processing – a middle step in the battery manufacturing process.

“It would offer a 10 per cent credit for the cost of production, so that is a rebate after you pay your tax, but it reduces your production by 10 per cent,” he said.

“We’re not seeking support for the mining operations, we are seeking support for the processing piece. I am differentiating between mining and chemical processing.

“On our own, we are doing very well on exporting our product overseas, but it is the next step, where you can capture a lot more value for Australians.”

The federal government is mulling the proposal ahead of the upcoming budget.

“We will consider all of these measures,” Prime Minister Anthony Albanese told reporters in Perth this week.

“We understand that the nickel industry is an important one, we want to provide support.

“That is why we’ve listed it as a critical industry, and we want to engage, including with the WA premier here, about the way in which we can support this industry.”

In the meantime, Resources Minister Madeleine King said she was ramping up efforts to market Australia’s nickel as a “clean, green” product that is worth paying a premium for.

“What we make is as clean and green as possible through our high ESG and worker safety standards,” Ms King told ABC Radio Perth last week.

“Now we just need to make the push to make it reflected in the price.”

Tim Treadgold was sceptical of this idea.

“Nickel is nickel,” he said.

“It’s a commodity. A very basic commodity.

“And if you start worrying where everything came from, you would never do anything.”

No one in Kambalda will be forgetting where it came from.

“One thing I know after 30 years in the Goldfields is that, particularly Kambalda people, are very upbeat and resilient, they’ve been through this many times,” Steve Cole said over the counter at the Nickel Bar.

“Most people that have been in the town have been here a long time, and they’ll ride this one out.”

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