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Slim nickel prospects for EV sector

There’s differing views in the market on the impact of electric vehicles on nickel demand, but as S&P Global Market Intelligence points out, not all nickel is equal.

In a report, S&P Metals & Mining Research senior analyst Adam Webb noted the heightened interest in nickel due to the booming battery and electric vehicle markets.

“Lithium-ion batteries used by many of the major electric vehicle manufacturers use a cathode that is primarily composed of nickel,” he said.

The report noted that nickel-manganese-cobalt batteries are the ones most widely used for EV batteries.

Their make-up currently comprises 60% nickel, but many manufacturers are looking to move to 80% nickel due to its ability to increase energy density and extend vehicle range.

“Other battery technologies are either already available or under development that use less or no nickel,” Webb said.

“However, given that the major electric vehicle producers are favouring 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.”

But not all nickel supply is suitable for use in battery cathodes, with S&P reporting that only 49% of 2017 nickel supply from sulphide and limonite deposits were suitable.

Supply from ferronickel and pig iron operations – which makes up the other 51% – is not suitable for lithium-ion batteries.

S&P estimates that mined nickel supply will grow by 12% between 2017 and 2020, while mined supply suitable for batteries will only grow by 2%.

Wood Mackenzie estimates that global nickel demand in 2017 increased by 6.7% to 2.18Mt, and was expected to rise by 5.3% this year to 2.3Mt and 2.4Mt by 2020.

“Our latest view on nickel demand in batteries for electric vehicles and energy storage is that consumption will increase from approximately 50,000t in 2016 to 112,000t in 2020,” WoodMac said last week.

Webb noted the rarity of nickel sulphide discoveries, with only one discovery in the past 10 years, Independence Group’s Nova-Bollinger, now in production.

S&P said the slump in nickel exploration budgets since 2008 meant that discoveries would likely continue to be rare.

However, it has identified nine projects that could add to nickel supply in the near-term, the bulk of which are in Australia.

They are: Metals X’s Central Musgrave; Clean TeQ’s Sunrise; Poseidon Nickel’s Black Swan and Lake Johnston; and Mincor Resources’ North Kambalda.

Other projects are RNC Minerals’ Dumont in Canada, First Quantum Minerals’ Trident and Enterprise, Noront Resources’ Eagle’s Nest in Canada, and PolyMet Mining’s NorthMet in Minnesota.

S&P has identified a further three projects – First Quantum’s Ravensthorpe and Panoramic Resources’ Savannah in Western Australia, as well as Votorantim’s Tocantins in Brazil as having the potential to be restarted if prices improve.

“Whether existing nickel supply and these potential additions will be sufficient to supply the long-term demand for nickel in the production of lithium-ion batteries remains to be seen,” Webb said.

“A lot will depend on how quickly electric vehicles displace internal combustion engine vehicles. If there is a shortfall, then it may lead to increases in the nickel price that could allow previously uneconomic projects to become viable and incentivise greater exploration spending on battery nickel.”

S&P said five of the projects – Central Musgrave, Sunrise, Dumont, NorthMet and Ravensthorpe – had sufficient reserves to operate for more than 20 years and could add 135,000tpa of nickel suitable for use in lithium-ion batteries, representing a 12% increase to the 2020 supply estimate.

Global Mining Research has highlighted the challenges for new nickel projects using high-pressure acid leaching, such as Central Musgrave and Sunrise.

According to GMR, capital intensity is high, nameplate capacity is often not achieved, or not consistently, and ramp-up projections are often unrealistic.

“Sulfide operations will continue to have an advantage over limonite operations, due to the factors mentioned above,” he said.

“However, an increase in nickel demand suitable for use in lithium-ion battery production may provide some respite to HPAL operations that have struggled in recent years.”

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Disclaimer: Statements in this article should not be considered investment advice, which is best sought directly from a qualified professional.