A few years ago the BHP of CEO told the Financial Times he wanted to “progress further in weighting the portfolio towards future-facing commodities like potash, copper and nickel” so that BHP would be “positioned for the next 20, 30 or 40 years”. BHP sold their oil and gas investments and have been progressively selling coal mines too.
In a great irony BHP’s nickel dream is being destroyed by a surge in Indonesian nickel production powered by coal. In 2022, the last full year for which data is available, Indonesian coal demand increased by a staggering 32 per cent. The growth is even more unbelievable given Indonesia was already a large user of coal. As the International Energy Agency commented Indonesian “nickel production has become an important driver of coal demand.”
Next time you are talking to a Tesla owner remind them that their massive batteries are charged by coal and made from coal!
Indonesian nickel production increased by 26 per cent in the first half of last year causing global production to increase by 13 per cent. Demand for nickel only increased by 2.4 per cent during that time. As a result, nickel prices halved.
For BHP it wasn’t meant to be like this. Both Australia and Indonesia have large nickel reserves. But Indonesia’s reserves come from laterite geologies with lower nickel content than Australia’s predominantly sulphide geology. Indonesia’s nickel ores require more energy (and more coal power) to improve them to a battery grade.
BHP thought because nickel was going into “green” vehicles, car manufacturers would prefer Australia’s more energy efficient and lower carbon nickel. They were wrong. As BHP executive, Johan van Jaarsveld, told the Melbourne Mining Club last year “The market is not really prepared to pay a premium yet for something that is more ESG-friendly nickel.”
It is not clear why our nickel should be more costly than the Indonesian product given that our nickel producers are investing in renewable energy. And, we are constantly told that renewable energy is the cheapest form of power. As we are finding out, this claim never seems to work in the real world. The more renewable energy we install the higher our power bills go.
The real world impact of this corporate naivety falls on the workers. Already, 1000 nickel miners have lost their job, and more than 10,000 might face unemployment if we lose the entire nickel industry which tragically is becoming more and more likely.
Worryingly for us in Central Queensland, the new Indonesian PM has said that he wants to extend their nickel success to other minerals like copper and bauxite. Bauxite is the raw material that makes, first, alumina and then aluminium. So unless we get our act together thousands of jobs at Gladstone would be at risk.
At least we can see the errors that have been made with nickel and have no excuses for repeating them. We should ditch the futile attempt to power aluminium smelters from renewable sources, as Rio Tinto is trying to do at the moment.
Instead, we need to replace the ageing Gladstone Power Station with a new modern coal fired power station. If we do not deliver cheap energy we will not be able to sustain high wage, manufacturing jobs. It is high time we drop the corporate speak and simply focus on making the best product and the lowest cost.
That is the only way we will be well positioned to face the increasing competitive threats in our region.
