New Caledonia - Economy
New Caledonia has the world's second largest nickel reserves, representing 11% to about 25% of the reserves on the planet. Only a small amount of the land is suitable for cultivation, and food accounts for about 20% of imports. In addition to nickel, substantial financial support from France - equal to more than 15% of GDP - and tourism are keys to the health of the economy.
On the economic front, engineer Jules Garnier began mining nickel mineral ore in 1894. It was only from 1960 onwards that the boom years of nickel production played a major role in boosting New Caledonia's economic development. Today, New Caledonia’s economy is driven by three key sectors: the mining industry - nickel (around 20% of GDP), magnesium, iron, cobalt, chromium and manganese, fiscal transfers from France (around 15% of GDP), and tourism.
In New Caledonia the climate is pleasant and without any great extremes. Fish, game, and other foods were easy to get. The island was sparsely settled, with room for all. So when white men wanted to hire the New Caledonia natives for hard labor in the mines, they replied they were getting along all right the way they were and didn't want hard labor. Because the native New Caledonians could not be interested in working in the mines, the mine owners imported labor from other parts of the Pacific, from more crowded lands where it was difficult to make a living.
During 2009-10, France sent more development assistance to New Caledonia than to any of its other overseas territories. In October 2014, French Prime Minister Manuel VALLS confirmed financial support to New Caledonia totaling $500 million for the period 2016-20. The new government, which inherited a $112 million deficit in 2013, is expected to focus on bringing the territory’s budget back into balance.
Substantial new investment in the nickel industry, combined with the recovery of global nickel prices, brightens the economic outlook for the next several years. With the gradual increase in the production of two new nickel plants in 2015, average production of metallurgical goods stood at a record level of 94 thousand tons. However, the sector is exposed to the high volatility of nickel prices. In April 2016, PM VALLS committed $180 million to support New Caledonia’s main nickel company, Societe Le Nickel.
By 2017 SLN said it wanted to lower production costs by a third within three years to ensure the business survives. The commodity slump of late had incurred SLN onging losses of almost one million US dollars a day, prompting a restructure which calls for a longer working week and job cuts. SLN said its target was to reduce the cost of producing one pound of nickel from $US6 in 2015 to $US4 in 2020. To achieve this, the workforce was to be cut from 2,000 to 1,700 within three years while changing work practices. This would entail changes to management and reducing the teams from five to four, who would then be made to increase their hours to 42 a week.
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