Financial Services Association, May 22 (Editor: Malan) Global nickel prices have continued to rise in line with the precious metals price boom. On Tuesday, the price of nickel on the London Metal Exchange rose from $18,150 per ton on May 8 to $2,1275, breaking above $20,000 per ton for the first time since September last year.

The rise in nickel prices is related to Western sanctions against Russian metals, but the biggest impetus comes from supply concerns raised by riots in France's overseas territory, New Caledonia.

New Caledonia has 20-30% of the world's nickel reserves and accounts for 6% of global nickel production. Nickel, on the other hand, is the main material for the global production of electric vehicle batteries, solar panels, steel and other products. It is also the backbone of the region's economy, accounting for 90% of export value and providing jobs for about a quarter of the archipelago's workforce.

Last week, France approved amendments to the Constitution to allow residents who have lived in New Caledonia for more than ten years to vote in local elections, igniting the turbulent situation in the region.

Some Aboriginal Kanaks have long sought independence, while non-indigenous people want to continue to be governed by the French government. The French parliament's move to amend the Constitution led some independent people to believe that it would weaken the representation of Aboriginal people, thus triggering riots.

On May 15, France urgently declared a 12-day state of emergency on the island and dispatched 1,000 soldiers to reinforce the area to stabilize the situation. And nickel prices have also skyrocketed since then.

The global nickel industry is watching with bated breath

New Caledonia's nickel mines are of key strategic importance to the European Union. As one of the core materials for electric vehicle batteries, the EU has always sought independence and stability in nickel supply, making New Caledonia a sensitive region.

Nicholas Ferns, a researcher at Monash University in Australia, pointed out that the EU and France have always wanted to maintain control over New Caledonia. The potential motive is to obtain large quantities of nickel there, thereby helping the EU's future electric vehicle production.

Adrian Gardner, chief nickel market analyst at energy research firm Wood Mackenzie, said that anything that happens in New Caledonia will arouse interest in the nickel industry.

New Caledonia's two major nickel processing facilities, Doniambo and Koniambo, account for nearly a quarter of the global supply of nickel iron, which is a key material for making stainless steel. Gardner said that a quarter of the nickel supply gap in the stainless steel industry is enough to cause panic. This is a real pressure point facing the global nickel industry.

William Talbot, chief nickel and cobalt analyst at Benchmark Mineral Intelligence, further warned that if riots lead to the gradual shutdown of local nickel mines, given the scale of New Caledonia's nickel industry, the global balance will soon be disrupted. However, in the long run, the sharp rise in nickel prices may be a good thing for the local economy.

Due to years of export restrictions and high energy costs, it is difficult for New Caledonia's mining industry to compete with Indonesia, the world's largest supplier of nickel. The nickel industry inevitably has problems with higher costs and lower profits. However, global nickel prices have been sluggish in recent years. In particular, nickel prices plummeted by 45% last year, causing a heavy blow to New Caledonia's economy.

Ferns added that the recent drop in nickel prices has exacerbated New Caledonia's economic problems, which may also be a trigger for the riots.

Earlier, the French government had promised to help maintain the operation of New Caledonia's nickel industry through subsidies.