The recent buzz in the commodities sector around lithium-ion batteries and their use in the growing electric vehicle market has centered around relatively minor commodities such as lithium, cobalt, vanadium and graphite. However, there are also implications for major commodities, and it seems likely, based on current technology, that nickel will play an important part in this story.
Lithium-ion batteries used by many of the major electric vehicle manufacturers use a cathode that is primarily composed of nickel. However, not all nickel supply is suitable for manufacturing battery cathodes. Only 49% of 2017 nickel supply, from sulfide and limonite deposits, is suitable for this purpose, and extracting nickel from the latter deposits is less attractive as costs are generally higher than from sulfide deposits.
Discoveries of new nickel deposits, particularly sulfides, are rare. Although there are a number of existing projects that could help meet increasing demand for nickel in lithium-ion batteries, it remains to be seen whether potential future output from these projects will be sufficient to meet the demand.
Tesla co-founder and CEO Elon Musk was quoted in 2016 as saying, “Our cells should be called Nickel-Graphite, because primarily the cathode is nickel and the anode side is graphite with silicon oxide … [there is] a little bit of lithium in there, but it’s like the salt on the salad.” Neither Tesla nor Panasonic, which manufactures the batteries used by Tesla, report the composition of the batteries used in their products. However, it is widely reported that Tesla uses a lithium-ion battery with a cathode primarily composed of nickel, cobalt and aluminum. These batteries typically have a cathode composition of 85% nickel, 10% cobalt and 5% aluminum.
Another widely used lithium-ion battery in current electric vehicles is the nickel, manganese and cobalt battery, which are used in electric vehicles produced by Chevrolet and Nissan. This battery has a cathode that is typically made up of 60% nickel, 20% manganese and 20% cobalt. However, many manufacturers of this battery are now working toward producing batteries with cathodes containing 80% nickel. This is because higher nickel content in these batteries increases energy density and extends vehicle range. This comes alongside efforts to minimize exposure to cobalt, which is primarily sourced from the Democratic Republic of the Congo, and because of the sharply higher cost of the metal; the cobalt price rose 129% in 2017.
Other battery technologies are either already available or under development that use less or no nickel. However, given that the major electric vehicle producers are favoring batteries with significant nickel content, we believe it likely that nickel will continue to be an important commodity in the manufacture of lithium-ion batteries for use in electric vehicles. Consequently, demand for nickel for this end use will increase along with the burgeoning use of electric vehicles.
Despite this important new source of demand for nickel, the metal’s primary use is in the production of stainless steel, and this will continue to be the case for the foreseeable future. Complicating the various supply-demand scenarios is the fact that not all forms of nickel-containing products from mining operations are suitable for use in batteries.
Nickel sulfate is the key nickel-bearing product used by battery manufacturers. This is why BHP Billiton Group committed US$43.2 million to facilitate nickel sulfate production at its Kwinana refinery at the Nickel West operation.
Nickel sulfate can only be produced economically from class 1 nickel products, which are defined as products with a nickel content of 99% or more, with the cost of converting ferronickel and nickel pig iron to nickel sulfate not being economically viable. This effectively rules out the supply of nickel for lithium-ion batteries from all ferronickel and nickel pig iron operations. In 2017, these operations produced 51% of global mined nickel supply, meaning a significant proportion of global nickel supply cannot be used in the production of lithium-ion batteries. We estimate that mined nickel supply will grow 12% from 2017 to 2020. However, we forecast that mined supply suitable for battery manufacture will only grow 2% over this period.
Source: S&P Global