Canada and Allies Weigh Trade Action Against China and Indonesia Over Nickel Market Manipulation

Canada and its allies are considering taking trade measures against China and Indonesia in response to their alleged manipulation of the global nickel market. Deputy Prime Minister Chrystia Freeland stated that the two Asian countries have tightened their grip on the critical mineral, with Indonesia increasing its share of global nickel supply from 7% to 55% in the past decade. Much of this new production is controlled by China-based mining companies.

The surge in nickel output from China and Indonesia has caused a glut of cheap nickel, driving down prices by over 80% and making the operations of Western mining companies uneconomical. "This appears to us to be deliberate market manipulation, which is not good for the economies and the national security of Canada and its allies," said Freeland. She added that Canada believes this behavior is intentionally aimed at driving Canadian and allied companies out of business.

Why this matters: Nickel is a critical mineral necessary for the energy and technology transition, and Canada has listed it among 31 metals vital to its economy and security. The alleged market manipulation by China and Indonesia threatens the viability of Western mining operations and the stability of the global nickel supply chain.

Canada is actively working with its democratic partners, including the Five Eyes Alliance (U.S., Britain, Australia, and New Zealand), to discuss collective responses to the nickel market situation. While Freeland did not specify if tariffs might be part of the strategy, she emphasized that Canada and its allies are exploring ways to 'friendshore' their critical minerals supply chain to combat the dumping of these materials in the international market.

The crash in nickel prices has put tremendous pressure on large Western producers, leading to mine closures, production cuts, and impairment charges. It has also raised concerns about the environmental impact of China and Indonesia's nickel production, which relies heavily on dirty energy sources. Canada's federal government has offered investment tax credits in its recent budget to attract global automakers to invest in the country's critical metal and electric vehicle supply chain, aiming to reduce dependence on China and Indonesia.

Freeland reiterated that Canada and its allies are committed to taking action to address the nickel market manipulation. "We are concerned about this behavior, which appears to us to be deliberate, which is certainly having a very negative effect on our companies, and we are working with our allies to decide how to respond," she said. The Canadian government will continue to monitor the situation closely and work with its partners to ensure a stable and secure supply of critical minerals for the future.

Key Takeaways

• Canada and allies consider trade measures against China, Indonesia over nickel market manipulation.
• China and Indonesia have increased their share of global nickel supply, driving down prices.
• Nickel is a critical mineral vital to Canada's economy and security, and this threatens Western mining.
• Canada and allies are exploring ways to 'friendshore' critical minerals supply chain to combat dumping.
• Canada offers tax credits to attract global automakers to invest in its critical metal and EV supply chain.