JAKARTA, Indonesia — Global nickel prices have soared since deadly violence erupted in the French Pacific territory of New Caledonia last week.

The overseas territory, which has been under French rule for over 170 years, is a major global producer of the critical material that is needed to make electric vehicle batteries, solar panels, steel and other everyday items.

Here’s a closer look at the global importance of New Caledonia’s nickel industry and why social unrest in the territory has impacted prices.

Riots erupted after French lawmakers approved changes to the French Constitution that would allow residents who have lived in New Caledonia for 10 years to vote in provincial elections.

Opponents fear the measure will benefit pro-France politicians in New Caledonia, where pro-independence indigenous Kanaks have long pushed to be free of France.

Kanaks are seeking independence for the archipelago of 270,000 people, while many descendants of colonizers and other non-indigenous people who have settled on the island want to remain part of France.

On May 15, France declared a 12-day minimum state of emergency on the island . It rushed in 1,000 troops to reinforce security forces that lost control of some parts of the capital, Nouméa.

New Caledonia holds between 20-30% of the world’s nickel reserves. It is a huge part of the archipelago’s economy, compromising up to 90% of its exports and employing around a quarter of its workforce.

The European Union has named nickel as a critical raw material, which means it is economically and strategically important for the European economy but is considered to have a high-risk associated with its supply.

“Some of the discussion around France wanting to maintain its control over New Caledonia is motivated by its hopes to secure the large nickel deposits there, perhaps with an eye to future electric vehicle production,” said Nicholas Ferns, a research fellow at Monash University in Australia.

The United States and EU members have worked to secure their own critical material supply chains to catch up with China, which controls or is invested in a large share of the world’s supplies.

In 2021, EV maker Tesla invested in the Goro nickel mine when it was sold to a local consortium majority owned by local stakeholders.

Concerns over disruptions of supplies from New Caledonia due to the unrest and sanctions on metals including nickel from Russia have pushed global prices above $20,000 per ton for the first time since September.

The price of nickel on the London Metal Exchange rose to $21,275 per metric ton as of Tuesday from $18,510 on May 8, heading straight up after the unrest began.

The jump in prices came at the same time the Paris-based International Energy Agency said in a report that there could be future supply shortages of critical materials— including nickel— driven by “rapid” EV demand growth, mine closures and slowing investment.

Although sharp jumps in commodities prices are disruptive for industries, New Caledonia’s nickel industry was in trouble even before the political crisis due to a 45% drop in global nickel prices last year.

That slammed the nickel industry-reliant economy. New Caledonia’s mining industry is struggling to compete against Indonesia, the world’s largest nickel producer, due to decades of export restrictions and high energy costs that have made its nickel more expensive and less profitable to produce. “The nickel industry is inevitably intertwined with the independence debate in New Caledonia,” said Ferns. “A downturn in nickel prices in recent years has exacerbated the economic issues in New Caledonia, which can then be connected to some of the factors involved in the recent riots.”

The French government has pledged to help maintain the territory’s nickel industry operations with subsidies.

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