France’s nickel production sector is at risk of collapse and must be refinanced and restructured to meet EU critical raw materials independence goals, a new government report warns.

The report, published on Tuesday, analyses the long-term negative performance of three of France’s most significant metals corporations operating in New Caledonia, a French territory off the east coast of Australia that is home to approximately 10% of the world’s nickel supply. Société Le Nickel, majority state-owned Koniambo Nickel and Prony Resources Nouvelle-Calédonie are all at risk of falling further behind their Indonesian and Chinese competitors.

“Unprofitable as they are, these companies depend on both private and public funding to carry out their activities,” the report states, warning that a complete breakdown of the sector is possible if nothing is done to rectify the situation. The lag in production is attributed primarily to the price volatility of nickel in the market, technical problems relating to production at factories, and rising energy and labour costs.

If the sector is restructured effectively, the report estimates that French nickel production could meet 85% of all French gigafactory needs and 15% of overall EU demand. It adds that “both China and Indonesia dominate the nickel value chain”, with China controlling up to 90% of Indonesian mines.

The report comes just months after the EU proposed its Critical Raw Minerals Act, which seeks to ensure the EU’s “access to a secure, diversified, affordable and sustainable supply of critical raw materials”. Europe is still heavily dependent on imports from third-country suppliers for its critical minerals supply, which is essential for the increased production of energy transition technologies.

In May, French President Emmanuel Macron stressed the importance of French and European independence regarding defence, energy and economic security. However, dependence on imports remains. Less than two weeks after the 'Accelerating Our Re-industrialisation' meeting, hosted by Macron, the French President announced a new partnership with Mongolia for the supply of critical minerals, principally uranium, which is key to the production of nuclear power.

“We have decided to work together to strengthen our energy sovereignty through the supply of critical metals from your country,” he told Mongolian officials at the time.