7 June 2023 – Indonesia is now also officially running out of nickel stocks. The government is apparently already discussing the possibilities of taking action against low-grade nickel smelters. The EU falls far short of its own green steel standards and is not making progress on renewable energy and green hydrogen. China continues to need large quantities of high-grade nickel. And labour costs soon to be biggest cost factor for mining industry.
Indonesia running out of low-grade nickel ore
According to several Asian media, the government of Indonesia is discussing a ban on the construction of further low-grade nickel smelters. The main reason is the dwindling Indonesian nickel resources, especially for low-grade nickel ore, which will run out in 9 to 10 years at the latest.
This assumption about dwindling ore stocks was probably formulated with political caution, so as not to scare off potential investors in nickel mining in Indonesia even further.
An end to the Indonesian ban on nickel exports is also hardly to be expected under these conditions. In addition, Indonesia wants to introduce its own price index by the end of the year in combination with an export tax for low-grade nickel products.
EU steel industry fails to make progress in expanding renewable energies
It is nothing new that the expansion of renewable energies in the European Union is lagging far behind the necessary investments. Depending on the scenario, a possible additional energy demand of more than 2,200 TWh is assumed for the production of hydrogen and other synthetic energy sources by 2050 for EU member Germany alone (Metastudie Wasserstoff). For this to be socially acceptable, up to 1,500 TWh of renewable energies would have to be expanded in Germany. [
Marginal share of EU steel production already needs an additional 165 TWh by 2030
The European steel industry is also aware of this, stating that it only needs 165 TWh of clean energy by 2030 for the green steel projects currently under development. And we are only talking about 60 projects here, which cover just a marginal share of European steel production capacity.
Green hydrogen continues to be conspicuous by its absence
The necessary expansion of green hydrogen, as we have pointed out several times and now also according to the EU steel industry, is not making any progress. The production capacities for green hydrogen are still at a homeopathic level but are nevertheless repeatedly used in the media as the great saviour. As always, the steel producers claim that this can only be achieved with extensive state support.
EU cannot meet its own standards
And while European steel producers are far behind the set targets and are now openly communicating this, the EU is closing its borders with unfair measures. Even its own manufacturers cannot meet the high standards it has set for the production of green steel. Especially not without state subsidies. A level playing field looks different. And it will only be fair if EU measures (such as the carbon border tax) are postponed until the EU can meet its own standards.
Demand for nickel in China likely to remain high
The Chinese government wants to extend and expand the tax exemption for new energy vehicles (NEVs). This is likely to continue to create high demand for high-grade nickel products for batteries and already China has achieved a penetration rate of more than 26% for NEVs.
Labour shortages and rising labour costs biggest challenge for mining industry
Labour costs will soon surpass oil costs as the mining industry’s biggest expense. Mines are also facing a shortage of skilled labour, which can be seen as a major indicator of high wages that could drive up mines’ operating costs. Wages for copper and gold mine workers in the southwestern United States have increased by about 10 %. Labour costs have increased by about 30 % since 2015. Labour costs are expected to be the fastest growing expense for mines in the US. In the EU, Canada and the US, labour costs have increased at a similar pace.
Wages and salaries essential component of operating costs
Labour costs are a significant part of operating costs, especially in the mining sector. Large countries around the world face the problem of finding skilled labour; this requires the development of industry-specific skills or a relaxation of immigration policies to attract skilled labour to reduce costs. Capital costs are affected by steel prices, energy prices and supply chain constraints. Costs are higher for plants with specialised functions. Overall, labour costs are likely to have a significant impact on the price development of mined raw materials in the near future.
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