A dump truck loads raw nickel ore at a nickel mining site of Vale in Sorowako, South Sulawesi province, Indonesia, on March 29.AJENG DINAR ULFIANA/Reuters
Nickel demand is increasing with the shift to electric vehicles. Let’s take a look at what is happening with this commodity.
Pricing:
Nickel prices were very volatile in 2022. On March 8, 2022, the metal topped US$100,000 a tonne before the London Metal Exchange halted trading, something that has never happened in the nickel market. The spike was driven initially by the outbreak of war in Ukraine, which led to a short squeeze and margin calls for Tsingshan Holding Group Co., a large stainless-steel manufacturer in China.
Supply:
The top five nickel-producing countries, based on 2021 data, are Indonesia (37 per cent), the Philippines (14 per cent), Russia (9 per cent), New Caledonia (7 per cent) and Australia (6 per cent). Production in Indonesia jumped 54 per cent in 2022 from a year earlier to 1.6 million tonnes. Global production was up 21 per cent last year to 3.3 million tonnes. Indonesia’s growth accounted for essentially all of that increase.
Canada is the sixth largest producer (5 per cent) with mines in Ontario, Quebec, Manitoba, and Newfoundland and Labrador. Canada has three refineries, in Fort Saskatchewan, Alta.; Sudbury; and Long Harbour, N.L. In 2020, the country produced 124,000 tonnes of refined nickel. According to the Canadian Mining Journal, the largest Canadian deposit – the Dumont deposit – is in the Abitibi mining camp in Quebec.
To help manage its supply chain, Ford Motor Co. F-N plans to invest US$4.5-billion in a battery material plant in Indonesia. Vale Indonesia, Huayou Cobalt Co. Ltd. and Ford will also make equity investments in the project, which could produce up to 120 kilotons per year of nickel.
Demand:
Historically, close to 70 per cent of refined nickel went into the manufacturing of stainless steel. In recent years, demand for nickel has been shifting to its use in EV batteries. Electric-vehicle battery demand now accounts for 5 per cent of overall nickel production. A typical 60-kilowatt-hour EV battery contains 40 to 50 kilograms of nickel. According to the U.S. Bureau of Labour Statistics, EVs will make up between 40 per cent and 50 per cent of new vehicle sales in 2030. In China, EV demand is projected to be similar.
Current global vehicle sales are in the 70 million to 80 million range. Using the 40-per-cent EV sales estimate, we would forecast total sales of 35 million electric vehicles by 2030. For comparison, the International Energy Agency estimates EV sales will then be around 45 million vehicles annually.
With the 40 to 50 kilograms of nickel per vehicle estimate, we would require between 1.5 million and two million tonnes of nickel annually for these EVs. Mining Weekly sees nickel output likely to reach 3.8 million tonnes in 2030. Brazilian mining company Vale SA sees demand as high as 6.2 million tonnes by 2030.
Outlook:
In the short term, increased Indonesian production, a slow Chinese reopening and recession fears are dampening the price of nickel. Looking further out, demand from EVs and other climate targets will cause a constrained supply that will require substantial price increases or a shift in technology.
Brian Donovan, CBV, is the president of StockCalc, a Canadian fintech based in Miramichi, N.B.
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