EV Battery-grade Nickel, The Automotive Industry Conundrum

According to an RBC Capital Markets report, nickel price rose to a 7-year high given the stinging growth in stainless steel demand –particularly that of mills. Week-on-week price starting September for the precious metal jumped 1.5% to $9.04 a pound, while exchange inventories dropped 3.4%.

So, from oversupply early this year to a record price at present, EV battery-grade nickel is becoming increasingly harder and more expensive to obtain, prompting electric car manufacturers to try and take the supply chain by the upstream scruff. What is the outlook?

EV Battery-grade Nickel 

Electric vehicle sales are nothing but increasing dramatically. EV Volumes statistics establish that during the first half of 2021 more than 2.6 million new EVs were sold, representing an upsurge of 168 % when compared to the same period last year. 

“The recent increases speak hyper-growth but need to be seen relative to the low base of 2020 H1. During the 1st wave of the pandemic, global sales of  EVs stayed -14 % below 2019 H1 volumes as vehicle markets declined by -28 % during 2020 H1.”

Meanwhile, as electric car sales rebound and more EV battery-grade nickel is needed, 

China is pushing the metal’s price higher. 

As reported by Oil Price “A technical squeeze on the SHFE and strong physical demand, manifested by rising imports, are supporting the price.” Further, state research house Antaike reported that the supply of refined nickel cathode in the Asian giant had fallen by 16% in July, compared to the same month last year.

Soaring Demand

From a macro perspective, the implementation of lower emission regulations across the globe –especially in Europe– is triggering massive EV production, with automotive giants like Ford Motor Company F recently announcing it would invest more in electric cars than on ICEs by 2023. 

S&P Global Market Intelligence commodity analyst Jason Sappor says that this is going to benefit primary nickel demand, “and we expect to see an increase in battery-grade nickel demand too.”

In this outlook, analysts from Market Intelligence have thrown a stunning prediction that is bound to upset the nickel supply chain in the next few years. They say that annual nickel consumption from passenger plug-in EVs could top 453,000 tons by 2025, up from 101,000 tons in 2020.

Few Alternatives

Although cobalt –also used in the manufacturing of EV batteries–  is more expensive than nickel, the latter’s rising price –and yes, environmental impact– is a reason for concern to the point of industry suppliers working on ways to get rid of it. 

Gerbrand Ceder, a materials scientist at the Lawrence Berkeley National Laboratory in Berkeley, California, says: “We have addressed the cobalt scarcity, but because we’re scaling so rapidly, we are heading straight for a nickel problem.” 

However, skiving off nickel would mean a switch to drastically different crystal structures for cathode materials.

Automakers’ Moves

Tesla Inc TSLA, the outright EV manufacturing leader, was quick to take the nickel supply threat by the scruff and announce a partnership with BHP Group Ltd BHP on July 22. 

Tesla was at the forefront of global EV sales in the first half of 2021 with 386,000 units, with VOLKSWAGEN GROUP Common Stock VOW trailing with 332,100 units –172,700 corresponding to Battery Electric Vehicles and 159,400 to Plug-in Hybrid Vehicles.

BHP Group is set to provide Tesla with nickel from the Nickel West mine in Australia, right after the carmaker had decided to meet some of its nickel needs from the Goro mine in New Caledonia.

The Market Intelligence report establishes that, around those days, the London Metal Exchange nickel stocks tumbled 6.7% “month over month, reaching 219,180 tons July 23”. 

SPG Global experts believe that the sturdy demand from China for nickel briquettes was behind the drop, as they are used to obtain the battery-grade nickel sulfate needed in EV batteries.

As nickel prices soar to record highs, Chinese primary nickel demand in passenger plug-in EV batteries is forecast to rise 84% between last and this year.

Disclosure: No positions