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Trouble in New Caledonia over links with China

Trouble in New Caledonia over links with China

Nickel mine at Thio, Southern Province, New Caledonia Photo: DeAgostini/Getty Images

In August the economy of the nickel-rich French territory of New Caledonia ground to a halt as truck drivers set up barricades preventing movement at strategic points around the main island. The drivers called for new exports of raw nickel to China to save their jobs, after local authorities had sought to prevent exports beyond New Caledonia's existing customers Australia and Japan. The month-long stand-off, which saw the death of a young Kanak after a car collided with a truck, seriously divided local political leaders. It ended only when the French High Commissioner called for a special meeting of the locally elected Congress.

That move backfired for pro-French parties.

On 15 October, after a long and difficult debate, the 54-member Congress effectively supported the drivers when it voted to allow exports to China. It was a close run thing: 27 voted in favour, 25 were opposed (two Northern Province representatives abstained). A separate vote to increase export volumes passed only with the President's deciding vote. Now a leading pro-France group wants discussion of the issue in the smaller, unelected Committee of Signatories to the Noumea Accord.

New Caledonia is in a sensitive phase. The 1998 Noumea Accord, which has brought decades of peace and prosperity, promises independence referendums by 2018. The nickel resource (New Caledonia holds at least 25% of global reserves) has been at the heart of the independence debate. [fold]

Parallel nickel 're-balancing' arrangements were fundamental to securing the cooperation of pro-France and pro-independence supporters to end the 1980s civil war. These arrangements involved redistributing revenues from the 150-year old colonial SLN nickel plant (locals now receive 34% of the revenue, although they want 51%), and development of two new massive plants, one in the Northern Province Kanak heartland, and one in the more European Southern Province, to process the resource at home. Longstanding — and relatively minor — exports of raw nickel continued to Japan and Australia (at Yabulu, now owned by Clive Palmer's QNI).

The stakes are high in the nickel industry. New Caledonia reaped the benefits of the steep increase in nickel prices in the last decade as global demand rose, especially from China. But the heyday is over. As China's economy has slowed, the price of nickel has plummeted, and New Caledonia finances are consequently under pressure. Major technical problems at each of the Northern and Southern Province projects have also stymied expected production, and more cash is unlikely given the challenges facing the project partners including Glencore (involved in the most sensitive Kanak-run KNS project in Northern Province), France's Eramet-SLN, and Brazil's Vale (in Southern Province). Shares in Glencore and Eramet have dropped 30% in recent months. The failure of authorities to finalise a much-delayed broad nickel assessment and strategy, a task stuck in a mire of ambiguous responsibilities and interests, has not helped.

These pressures, coming as Noumea Accord deadlines loom, have revealed complicated loyalties that are open to manipulation. Political posturing has intensified as parties set out their ambit positions in the ongoing final referendum preparations. Primarily pro-independence Northern Province managers traditionally favoured local processing over raw nickel exports. Over time, however, they developed new partners and, significantly, negotiated joint-venture arrangements for processing nickel overseas with Korea's Posco in Gwanghyang, and China's Jinchuan in Guanxi. These agreements concern French authorities.

As Northern Province managers developed their links with major Asian clients, and as technical problems and price drops delayed production and employment at home, new possibilities for exporting raw nickel to China emerged. For some, these new links may be reminiscent of pro-independence links with Russia and Libya in the dark days of the 1980s civil war. Pro-France politicians are exploiting fears of the China link to enhance support and divide the opposition, and have won backing from one or two disaffected pro-independence supporters. Australian interests have been engaged in passing: QNI has been accused in the French media of seeking more favourable conditions for its raw nickel purchases, and the payment of local taxes by the Palmer-owned company has been questioned.

These matters have received virtually no coverage in the Australian press, even though New Caledonia's future is set to be redefined in the not too distant future. We need to understand the complexities of the situation while respecting local processes under way. The economic and political stakes have never been higher for local leaders, and differences over the nickel issue will continue.

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