2024-02-12 17:48:11
This is the disaster scenario feared by the State which is taking place, even if it happens 17,000 kilometers from the mainland. The Swiss giant Glencore announced on Monday February 12 the shutdown of its Koniambo (KNS) ferronickel production plant in New Caledonia, due to lack of profitability. It will be put on hold, including maintaining the ovens at temperature, for at least six months, while a possible buyer is found.
A structurally loss-making factory
In September, the commodities trader had already warned that it would not last long without more public support. Today, in its press release, Glencore welcomes “the efforts of the French government to revitalize and save the nickel industry in New Caledonia”adding nevertheless that “even with the assistance offered, KNS remains an unsustainable operation”.
The group is a 49% shareholder in the factory. The remaining 51% is held by the Société Minière du Sud Pacifique (SMSP), created by the separatists of the Northern province, following the Nouméa Accords in 1998. The KNS factory was the flagship project of the economic rebalancing between the North and the South of the French Pacific archipelago.
But it was never profitable, to the point of having a debt of nearly 14 billion euros. In 2022, for a turnover of 571 million euros, KNS posted 523 million operating losses and 732 million financial expenses!
No industrialist is profitable
In August 2023, a report published by the General Inspectorate of Finance (IGF) threw a wrench into the pond by recalling the very serious difficulties of the entire nickel sector in New Caledonia “which has not demonstrated its economic viability”. It has three extraction and processing plants: Koniambo, Prony Ressources and that of La Société le nickel (SLN) belonging to Eramet. None has really made money over the last twelve years, underlines the IGF report.
« Metallurgical activity is not profitable in New Caledonia over the last twelve years and has depended on public and private capital flows to ensure the continuation of operations. », Explains the document.
Among the causes put forward, the sector must face labor costs and access to energy, much higher than its direct competitors, such as Indonesian nickel. There is also the reduction in the nickel contents of molten ore, with the exhaustion of the richest deposits and the regulatory difficulties in exploiting new ones. Added to this are endemic social problems, with repeated strikes and blockades. Over the past year, prices have also been almost halved.
A lot of public money put on the table
This is a major subject because the nickel sector represents a quarter of the archipelago’s private jobs and 20% of its GDP. “The search for buyers is essential and we are ready to support it”, declared Monday the office of the Minister of the Economy, Bruno Le Maire, a few minutes after Glencore’s announcement. But “It is imperative that manufacturers take economic risks in these operations”we emphasize at Bercy, emphasizing the “exceptional support” already brought to KNS, and for which “it is not possible to go beyond”.
Questioned in the Assembly on February 6, Bruno Le Maire detailed the proposals made to Glencore: “ 60 million euros in subsidies on the price of energy, 45 million euros in additional resources, a loan of 100 million: 200 million euros for the only factory in the north to guarantee its sustainability in the form of public support ».
The prospect of a nickel pact is fading
He called on shareholders to take their responsibilities, also targeting the separatists of the Northern province, who have a majority stake in KNS, but have so far not assumed any financial loss.
The stakes are obviously enormous, at a time of energy transition and the search for greater European sovereignty. “New Caledonia’s capacities could theoretically ultimately represent up to 85% of the nickel needs of French gigafactories in 2030 or 14% of EU needs in 2035”, underlines the IGF. We are far from it at the moment.
At the end of November, Bruno Le Maire went there to try to conclude a «pacte nickel» with the various New Caledonian stakeholders in order to ensure the future of the sector. He then estimated the immediate financing needs of the three factories at 1.5 billion euros. Since then, an inspection mission from Bercy had made several return trips and the government was counting on an agreement by the end of February.
The idea was that the government would commit to subsidies and investments to lower the cost of energy, in exchange for a change in the « doctrine nickel » advocated by the separatists which currently prevents the export of raw ore – a profitable activity. For their part, manufacturers also had to commit to an investment plan. But Glencore’s announcement will shake up the calendar.
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