Australia’s government has granted nickel producers access to a A$4bn critical minerals fund run by its state export credit agency as the industry reels from plunging prices and competition from Indonesia.

The move comes as Australian mining firms such as IGO, First Quantum and Wyloo have either suspended operations or reduced investment in their nickel operations. BHP is also considering the possibility of winding down its site in Western Australia.

In a bid to provide support, the government says firms can now tap a fund administered by the country’s export credit agency.

The critical minerals facility was first launched in 2021 to spur investment in minerals deemed critical to national and economic security and which are vital for transition sectors such as electric vehicles and renewables.

The facility had its first outing two years ago, and in October last year, received a A$2bn state funding boost. Nickel had previously been omitted from the 31-strong list of minerals, which also includes lithium, cobalt and graphite.

“The international nickel price is forecast to stay relatively low through 2024, and likely for several years to come until the surplus of nickel in the market is corrected,” says Australia’s federal resources minister Madeleine King.

In a February 16 statement, she noted “at least six [nickel mining] facilities” have reduced operations or gone into care and maintenance since mid-December.

“Given impacts to our domestic capacity and noting the broader market developments presently unfolding in the nickel sector, I am fully convinced that we must be proactive in addressing the recent developments,” she said.

A spokesperson for Export Finance Australia confirms that nickel projects can now be considered under the critical minerals facility, though clarifies it has a “long history” of supporting nickel mining firms, SMEs, as well as supply chain companies, under its commercial account.

The Australian government has also offered production tax credits, royalty relief and non-recourse loans and grants to the nickel industry, amid fears mine closures could impact thousands of jobs and hurt the country’s economy.

Australia – the world’s fifth largest producer of mined and refined nickel – has been hard hit by shifting market dynamics, with prices plummeting by nearly 48% in the year to January due to an oversupply from Indonesia.

This week, Australian mining giant BHP reported a sharp drop in profits, down by nearly 90% to just under US$1bn in its H1 2024 result.

A substantial portion of this decline was attributed to a US$2.5bn write-down of its Western Australia unit.

The firm would have scored profits of US$6.6bn were it not for charges related to Nickel West and the Samarco iron ore dam disaster in Brazil.

In an analyst briefing, BHP’s CEO Mike Henry says the company is now considering whether to place its Western Australia nickel business under a period of “care and maintenance” until the market stabilises.

“The glut is so significant coming out of Indonesia and that’s now impacting on Class-I nickel prices. We do expect that could continue until the end of the decade,” he said.

“Clearly we weren’t expecting the nickel market to plunge as quickly and as significantly as it has,” he added.

In January, Canada’s First Quantum Minerals said it would suspend mining operations at its Ravensthorpe nickel mine in Western Australia and instead produce nickel purely from stockpiles, putting over 100 jobs at risk. The company has recorded an impairment charge of US$854mn on the mine.

Australian firms IGO and Wyloo Metals, owned by Australian billionaire Andrew Forrest, have both said they are preparing to put their nickel mines into care and maintenance.

According to a February analysis by ING – published prior to BHP’s announcement this week – total suspended capacity in Australia accounted for around 1.7% of global mined nickel capacity in 2023.

Australia’s nickel mining crisis is being fuelled by Indonesia’s market dominance, with the country having banned ore exports in January 2020 and encouraged foreign investment into its smelting industry.

Indonesian nickel production has more than doubled in just three years as a result of this push, ING says. The bank warns the closure of mines in Australia and Canada could leave western supply chains exposed.

“The recent supply curtailments limit the supply alternatives to the dominance of Indonesia, where the majority of production is backed by Chinese investment. This comes at a time when the US and the EU are looking to reduce their dependence on third countries to access critical raw materials,” it says.