Nickel the latest metal to feel the Electric Vehicle buzz

LONDON, Oct 25 (Reuters) – First it was lithium. Then it was cobalt. And now it is nickel’s turn in the electric vehicle spotlight.

Nickel is just as important as the other two metals in manufacturing the batteries that will power the green technology revolution.

It is used in both currently dominant lithium battery configurations, nickel-cobalt-manganese and nickel-cobalt-aluminium.

Indeed, it may increase its material share against cobalt, a metal that is posing all sorts of supply problems, both physical and ethical, for the automotive sector.

Growing demand from battery-makers will exacerbate “the predicted structural shortage of nickel between now and 2025,” according to research house Wood Mackenzie.

The outlook for nickel, it said, “is one of deepening deficits, falling stocks and rising prices.” (“A demanding supply problem for nickel”, October 2017)

It’s exactly the sort of rallying cry that frustrated nickel bulls have been awaiting and has helped keep London nickel bubbling around the $12,000 per tonne level.

But unlike lithium and cobalt, both of which have experienced straight-line price rallies over the last year or so, nickel looks more of a slow-burn story with some complicated plot twists.


Wood Mackenzie estimates that nickel demand from the electric vehicle sector is going to grow from 40,000 tonnes in 2016 to 220,000 tonnes in 2025.

Or to 275,000 tonnes, if other battery applications such as grid storage are included.

Given the global nickel market is around 2.1 million tonnes in size, the volume impact is going to be much less dramatic than in either cobalt or lithium.

Nor is the nickel market tight right now.

The International Nickel Study Group (INSG) is forecasting supply will fall short of demand again next year, meaning three consecutive years of deficit to the cumulative tune of almost 200,000 tonnes.

If that sounds bullish, however, it’s worth bearing in mind that the INSG calculates a global supply surplus of 470,000 tonnes over the 2012-2015 period.

That surplus is still being worked off.

Right now, there is no need for the sort of panic buying episodes that have characterised both lithium last year and cobalt this year.

Graphic on China’s nickel imports:


Nickel supply has proved much more resilient than expected in the face of last year’s historically low prices and resource nationalism in both Indonesia and the Philippines.

Bulls were betting that some combination of those factors would curtail sufficiently the flow of nickel ore to China to impact that country’s production.

But it hasn’t worked out that way.

China imported 5.67 million tonnes of nickel ore and concentrates in September, the highest monthly total since January 2014, when Indonesian shippers were rushing to beat a ban on raw material exports.

Cumulative imports totalled 26.0 million tonnes in the first nine months of this year, up almost 9 percent on last year.

Not only has Indonesia partly reversed that 2014 ban but supply from the Philippines has not collapsed after a high-profile environmental campaign against open-pit miners, many of them nickel producers.

Extra raw materials supply is now also coming from the new generation of nickel pig iron (NPI) producers that have off-shored from China to Indonesia in the wake of the 2014 ban.

China’s nickel raw materials supply chain has adjusted to a succession of shocks over the last few years but is looking as robust as ever.

Proof comes in the form of the country’s reduced call on imports of refined metal, which have fallen by more than half year-on-year to 141,000 tonnes in the January-September period.


That’s an important reason why London Metal Exchange (LME) stocks remain stubbornly high.

The exchange’s warehouse system has seen plenty of nickel stocks movement over the course of this year but the net change has been a small 12,450 tonne increase.

What has changed is the composition of LME stocks with those of full-plate cathode falling and those of briquettes rising. That’s due to the mass movement of Russian cathode to China, where it is the only non-Chinese deliverable brand against the Shanghai Futures Exchange contract.

Full-plate nickel used to account for the vast majority of LME-registered stocks. As of today it represents just 24 percent of the total.

That is also a positive for battery manufacturers.

Because one of the kinks in this particular battery materials story is the sort of nickel that’s required.

The principle feed for batteries is nickel sulphate, which is made by dissolving nickel in sulphuric acid.

As Wood Mackenzie points out, the ideal form of nickel for this process is pure metal in powder, pellet or briquette form.

Cathode plate can be used but “energy requirements are greater and dissolution times are longer, making that process a more cost-intensive one.”

High LME stocks of nickel in precisely the best form for battery manufacturers are another reason not to expect the sort of rapid price appreciation experienced by other battery materials.


Things, however, get more interesting further down the line.

Thanks to the build-out of China’s nickel pig iron sector over the last decade, much of the current project pipeline is for either NPI itself or for ferronickel.

Both are fine for stainless steel producers, who currently account for the bulk of nickel usage, but neither is much use for battery-makers.

They need pure metal in non-plate form, putting them in direct competition with super-alloy manufacturers, a tussle for units that is going to get increasingly fierce.

The only question is one of timing, dependent as it is on the multiple moving parts of the electric vehicle and grid storage technology revolution.

It is quite conceivable that the nickel market, already a construct of several discrete nickel product lines, starts to splinter between metallic and chemical usages.

That’s a future worry but for now don’t expect too many electrified sparks in the nickel market.

There’s still a lot of the stuff around.


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