Tensions in the French Pacific territory of New Caledonia have sent shockwaves through global nickel markets, with prices soaring in response to deadly violence that erupted last week.

As a major producer of nickel, a crucial component in electric vehicle batteries, solar panels, and steel, New Caledonia plays a significant role in global industry. However, recent unrest has disrupted operations and raised concerns about supply stability.

The violence erupted following approval of changes to the French Constitution, which would grant voting rights in provincial elections to residents who have lived in New Caledonia for 10 years. Pro-independence groups fear this could tilt the balance of power in favor of pro-French politicians, sparking protests and riots across the territory.

France declared a state of emergency and deployed troops to restore order, highlighting the severity of the situation. With New Caledonia holding between 20 and 30% of the world’s nickel reserves, the unrest has sparked fears of supply disruptions and instability in global markets.

The European Union has designated nickel as a critical raw material, underlining its importance to the economy. Countries worldwide, including the United States and EU member states, are seeking to secure their nickel supply chains amidst growing demand for electric vehicles.

The price of nickel surged above $20,000 per tonne for the first time since September, driven by concerns over supply disruptions from New Caledonia and sanctions imposed by Russia on metal exports. The price rise underscores the vulnerability of global markets to geopolitical tensions and unrest in key producing regions.

While the nickel industry in New Caledonia has faced challenges in recent years due to fluctuating prices and competition from other producers, the current crisis has intensified economic woes. The French government has pledged support to maintain the territory’s nickel industry through subsidies, but the long-term impact of the unrest remains uncertain.

In conclusion, the unrest in New Caledonia serves as a stark reminder of the interconnectedness of global markets and the fragility of commodity supply chains. As tensions persist, stakeholders must navigate the complexities of geopolitics and economic stability to safeguard against future disruptions.