Could nickel reserves be the key to independence for New Caledonia?

Jun 07, 2023

The South Pacific French territory of New Caledonia is a major producer of nickel, a metal that is increasingly in demand around the world to make electric car batteries. The precious resource is at the heart of a political and economic tug of war between indigenous, pro-independence groups and the administration in Paris.

Issued on: 05/08/2023 - 15:07

New Caledonia is the world’s fourth-largest nickel producer. According to Investing News, a Canadian portal that focuses on metals, the archipelago produced 190,000 metric tons in 2022 – less than Indonesia, the Philippines and Russia, but ahead of Australia and Canada.

"The nickel sector contributes around 90 percent" of New Caledonia's export value, according to Matthias Kowasch, professor of geography and economics education at University College of Teacher Education Styria in Graz, in Austria.

"And that shows the importance," he says.

New Caledonia's riches have always attracted outsiders. The discovery of nickel and its lucrative mining was one of the reasons that French settlers moved to this overseas territory on a massive scale, outnumbering the indigenous Kanak population.

Over the centuries since France annexed the island chain in 1853, tension has flared, reaching a peak in the 1980s with a short but brutal, civil war that saw Paris quell independence aspirations.

A series of agreements between France and New Caledonia have brought relative stability, but full independence remains a dream for many.

PODCAST: Matthias Kowasch, Professor Geography Education at University College of Teacher Education, Graz, Austria.

Under the Noumea Accord of 1998, Paris vowed to gradually give more political power to the territory and decide its future through three referenda – the last of which was boycotted and rejected by pro-independence groups.

During his recent visit to New Caledonia, French President Emmanuel Macron did not exclude a future referendum, but concrete discussion seems to have been put on hold for now.

The pro-independence groups, which govern the northern province of New Caledonia's main island, do have a trump card: most of the nickel mining is located on their territory.

According to Kowasch, New Caledonia's nickel resources are "under control of the provinces first". The tiny archipelago has some 20 mines, which experts estimate contain around 25 percent of the world's reserves not yet extracted.

Meanwhile nickel ore processing is in the hands of private companies: global giants Eramet (a company that was founded on New Caledonia in 1880), Glencore and Trafigura. The local governments have a 51 percent stake in two of the three main processing plants, Koniambo and Goro Nickel.

In the north, this means pro-independence Kanak groups control the processing.

"Most pro-independence parties have the position that New Caledonia should hold more than 50 percent in the nickel processing projects in the country," according to Kowasch.

In the south, processing is controlled by Prony Resources, in which New Caledonia has a 51 percent stake via employees, local communities and a public investment company.

The difficulty is for France to find its place among other countries that are also after the massive nickel reserves – notably China, which currently is the world's largest nickel importer. It needs more and more of the mineral to feed its battery and electric vehicle industry, which is growing exponentially.

The raw materials, combined with New Caledonia's strategic location in the South Pacific, underline the importance of Macron's recent visit to the islands.

But more important for France (and the EU as a whole) is the fact that Indonesia, the world's largest nickel producer, banned export of raw nickel ore in 2020 – which is also the aim of pro-independence groups in New Caledonia.

Under President Joko Widodo, Indonesia has been progressively banning the exports of key minerals such as nickel, bauxite, copper and tin. At the same time, it has forced foreign investors to build domestic processing plants, so the higher-value end product contributes more to Indonesia's economy than the export of raw materials.

The EU has contested the ban, but French-controlled New Caledonian nickel reserves could compensate for the decline in nickel imports from Indonesia.

Alex Lo, a columnist for Hong Kong's South China Morning Post – which is strongly monitored by China – writes that "New Caledonia could theoretically take up the slack in nickel supplies from Indonesia".

But, he warns, "the territory could declare independence, kick out the French, and invite the Chinese to invest in its mines and smelters".

For now, France is doing everything to keep its influence in the South Pacific despite the growing independence movement.

"There are many compromises in between," says Kowasch, referring to a proposal by some of the pro-independence groups "where France can be responsible for defence or foreign politics", for example.

Full independence that would see France kicked out completely is unlikely, he believes, because ties with Paris are strong.

"Even the pro-independence parties don't want to stop all relations with France, even if there is full independence," Kowasch says.

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