Western Australia said on Saturday it would offer royalty relief to nickel producers in a bid to buoy the struggling industry, a day after the metal was classified as a "critical mineral", paving the way for producers to access billions of dollars in cheap government loans.

Australia wants to build a battery chemicals industry to reap more value from mineral wealth, but its nickel sector faces heavy job cuts after a jump in Indonesian supply saw prices drop 40% in a year.

In a statement on Saturday, Western Australia Premier Roger Cook announced a nickel financial assistance program, which he said would give a 50 percent royalty rebate for 18 months, when prices were below $20,000 per tonne, repayable over 24 months.

"The Cook government will offer royalty relief to Western Australia’s crucial nickel industry, supporting thousands of local jobs as well as the state’s vision of becoming a global battery minerals processing hub," the premier's statement said.

Federal Resources Minister Madeleine King on Friday placed nickel on the critical minerals list, meaning nickel companies will have access to financing under Australia's $2.6 billion Critical Minerals Facility which offers low-interest loans, and related grant programmes.

Weak nickel prices have forced Australia's high cost producers to announce several writedowns and restructures, and analysts said last month it will force a rethink by top global miner BHP Group on its nickel strategy this year.