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in the EV limelight","nickel-in-the-ev-limelight","article/nickel-in-the-ev-limelight",{"_uid":557,"date":558,"tags":559,"editor":560,"content":570,"excerpt":807,"featured":50,"reporter":808,"_editable":812,"component":813,"seo_title":553,"categories":814,"visibility":820,"author_company":49,"featured_image":821,"seo_description":807,"author_full_name":49,"author_job_title":49,"formattedDate":826,"formattedArticleDate":827},"b746ec25-59df-4bb3-ae56-b0354a775b34","2020-11-04 00:00",[],[561],{"slug":562,"name":563,"content":564},"didi-bostock","Didi Bostock",{"job_title":565,"image":566,"bio":568,"linkedin":569},"Editor - Energy Transition & Economics",{"filename":567},"https://a.storyblok.com/f/287943243085208/512x512/2c5ca5c1a3/didi-bostock.jpeg","Didi is the Energy Transition & Economics Editor at Benchmark, covering a broad range of markets across the energy transition. His remit spans from downstream sectors such as BESS and EVs, through to midstream such as new technologies and battery production, to upstream critical minerals mining. He also leads on financial analysis across these supply chains, alongside in-depth policy analysis.\n","https://www.linkedin.com/in/didi-bostock-656342198/",{"type":571,"content":572},"doc",[573,580,585,588,593,598,603,608,613,618,625,632,635,640,645,650,655,666,671,676,681,686,691,696,701,706,711,716,721,724,729,734,739,744,749,754,759,764,769,774,779,784,789,794,799],{"type":574,"attrs":575,"content":576},"paragraph",{"textAlign":49},[577],{"text":578,"type":579},"Nickel has often been the overlooked raw material for batteries with much attention focused on lithium and cobalt. For the nickel industry, batteries are still a relatively minor end-use, accounting for around 5% of end-use demand with demand still dominated by stainless steel demand, which was 70% of demand in 2019.","text",{"type":574,"attrs":581,"content":582},{"textAlign":49},[583],{"text":584,"type":579},"While the nickel industry is gearing up to meet expected major strong growth in demand from the battery market, particularly after 2025, many in the industry have been disappointed by lacklustre demand progress in 2019 and 2020 which are being referred by industry insiders as the two “lost years” in market development. The industry is also nervously watching the renewed growth in lithium iron phosphate (LFP – no Ni, no Co) battery demand in China, worried that it potentially could further dent growth prospects outside China in the coming years.",{"type":574,"attrs":586,"content":587},{"textAlign":49},[],{"type":574,"attrs":589,"content":590},{"textAlign":49},[591],{"text":592,"type":579},"Nickel came into renewed and intense focus in July 2020 with widespread reporting and reaction to the following comments from Elon Musk in Tesla’s second-quarter earnings conference call: “…Tesla will give you a giant contract for a long period of time if you mine nickel efficiently and in an environmentally friendly way. So, hopefully this message goes out to all mining companies. Please get nickel.”",{"type":574,"attrs":594,"content":595},{"textAlign":49},[596],{"text":597,"type":579},"He asked the industry to invest now and not wait for higher prices. Musk’s comment were made in the context that Tesla has decided to use a LFP battery in its Model 3 for sales in the Chinese market, following improvements in efficiencies, which will give this battery a range of “almost” 300 miles between charges. We think that he wanted to reassure the nickel industry that Tesla would run two electric vehicle supply chains in future: LFP (for cheaper, shorter range passenger vehicles and storage applications) and nickel-rich batteries (for higher -performance passenger vehicles and semis). This was confirmed at the Tesla Battery Day with a further division of the nickel rich batteries into Ni-Mn and 100% Ni batteries.",{"type":574,"attrs":599,"content":600},{"textAlign":49},[601],{"text":602,"type":579},"While it is by no means unusual for a buyer to ask for more supply, the reaction to Musk’s comments were felt in the LME nickel price, which rallied immediately on speculative buying, and also in a major spike in the share prices of some Canadian nickel juniors seeking finance for their “low-carbon” and “clean” nickel from their concentrate mining projects involving mineral carbonation.",{"type":574,"attrs":604,"content":605},{"textAlign":49},[606],{"text":607,"type":579},"While Tesla may be using less nickel in some of its models, the same cannot be said for its competitors, particularly in Europe, where there appears to be a race to use of high-nickel chemistries in the next generation of EVs. It still looks like that there is a bright outlook for nickel demand growth in batteries.",{"type":574,"attrs":609,"content":610},{"textAlign":49},[611],{"text":612,"type":579},"Current industry consensus remains that nickel usage in batteries could grow from around 150ktpa to 400-500kt by mid-decade and then to 1mt+ by the early 2030s. These are big numbers in the context of a total nickel market of 2.3mt in 2020.",{"type":574,"attrs":614,"content":615},{"textAlign":49},[616],{"text":617,"type":579},"Where will that nickel come from?",{"type":619,"attrs":620,"content":622},"heading",{"level":621,"textAlign":49},4,[623],{"text":624,"type":579},"From mine to EV",{"type":574,"attrs":626,"content":627},{"textAlign":49},[628,630],{"text":629,"type":579},"Nickel is mined from two types of ores, sulphides, and laterites. Sulphides are mined from hard rock that has formed from crystallization of magma and often occurs with copper, cobalt and PGMs and are normally concentrated, smelted and refined into class 1 nickel metal. Laterites are formed by the weathering of olivine-rich ultramafic",{"text":631,"type":579},"rocks under by rainfall, drainage, temperature, and slope and are found mainly in the tropics.",{"type":574,"attrs":633,"content":634},{"textAlign":49},[],{"type":574,"attrs":636,"content":637},{"textAlign":49},[638],{"text":639,"type":579},"The upper layer of a laterite ore body is called the limonite zone and these ores are typically processed by hydrometallurgy into class1 nickel products (some are also smelted in a blast furnace to make low-grade nickel pig iron). The lower layer is the saprolitic zone and these ores are typically smelted into ferronickel or nickel pig iron, products that are used to make stainless steel. Both ferronickel and nickel pig iron can also be converted into a nickel matte by addition of sulphur in a converter and then can be refined into class 1 nickel.",{"type":574,"attrs":641,"content":642},{"textAlign":49},[643],{"text":644,"type":579},"A common misunderstanding, repeated ad nauseum, is that the only form of nickel suitable for nickel sulphate production is “class 1” nickel, implying metallic, LME deliverable nickel. It is also asserted incorrectly that class1 can only be made from sulphide ores.",{"type":574,"attrs":646,"content":647},{"textAlign":49},[648],{"text":649,"type":579},"The reality is that multiple forms of nickel are currently used to make nickel sulphate for the industry including:",{"type":574,"attrs":651,"content":652},{"textAlign":49},[653],{"text":654,"type":579},"A number of sulphide nickel miners have stated that they are developing technologies to make nickel sulphate directly from nickel concentrate, but none have yet to demonstrate that this is economically feasible, especially since payables for nickel in concentrates to produce nickel matte and make refined nickel metal are very attractive at the moment.",{"type":574,"attrs":656,"content":657},{"textAlign":49},[658,660,662,664],{"text":659,"type":579},"The reality is that dissolving class 1 nickel in sulphuric acid is the most expensive way of making nickel sulphate since the cost of product is the raw material cost of LME price plus metal premium topped up with",{"text":661,"type":579},"conversion costs. The other products (non-class 1) typically sell at a discount to LME (",{"text":663,"type":579},"Benchmark",{"text":665,"type":579},"’s new assessment of MHP was that it is selling at 75-81% of the LME price) and this leaves room to convert into nickel sulphate in many instances at a total cost lower than the LME nickel price.",{"type":574,"attrs":667,"content":668},{"textAlign":49},[669],{"text":670,"type":579},"Virtually all the known projects to supply additional nickel units to the market are based on laterite nickel ores and will mostly make intermediate nickel-cobalt products which can then be leached and refined directly into nickel sulphate, by-passing the need to make class 1 nickel metal or briquettes.",{"type":574,"attrs":672,"content":673},{"textAlign":49},[674],{"text":675,"type":579},"Tesla reported a novel technology at its Battery Day to make precursors directly from nickel metal powders, by-passing the step to make nickel sulphate. It is not clear when this will be introduced, and it is unlikely that its competitors will adopt this technology any time soon. This would probably lead to the refining the nickel intermediates into metal instead of sulphate, a more expensive process route for nickel producers.",{"type":574,"attrs":677,"content":678},{"textAlign":49},[679],{"text":680,"type":579},"Most of the projects plan to use the high-pressure acid leach (HPAL) process, which has a history of significant technical challenges, construction delays and major capital cost over-runs. Until the first plant rolls out in early 2021 (PT Halmahera Persada Lygend), there remain some doubts about whether a smooth ramp up will be achieved. One of the plants in our list, VNC, is a high-cost plant that recently converted from producing mostly nickel oxide to an intermediate product for nickel sulphate producers. It is currently under a cloud and could close unless a new owner is found.",{"type":574,"attrs":682,"content":683},{"textAlign":49},[684],{"text":685,"type":579},"Figure 3 gives our estimates and projections of the sourcing of nickel units to make nickel sulphate out to 2025. Class 1 type nickel metal/powder units used would rise from 60kt this year to around 120kt by 2025 (assuming nickel sulphate remains the only raw material to make precursors), when they would represent around a quarter of total nickel used to market nickel sulphate.",{"type":574,"attrs":687,"content":688},{"textAlign":49},[689],{"text":690,"type":579},"This incremental demand could largely be met from the displacement of class 1 nickel units currently used in stainless steel production by rapidly growing nickel pig iron production in Indonesia. As the marginal high-cost source of nickel sulphate, their conversion costs from an LME deliverable product will most likely determine the minimum medium term premium of nickel sulphate prices over LME nickel price.",{"type":619,"attrs":692,"content":693},{"level":621,"textAlign":49},[694],{"text":695,"type":579},"EV’s nickel challenges",{"type":574,"attrs":697,"content":698},{"textAlign":49},[699],{"text":700,"type":579},"The path to supplying nickel for the battery market is not that simple, however. Many challenges remain. The first is the dominance of Chinese-controlled projects in Indonesia to meet the bulk of incremental demand growth, something that sits uneasily with the current geopolitical environment.",{"type":574,"attrs":702,"content":703},{"textAlign":49},[704],{"text":705,"type":579},"Over 60% of supply chain, from nickel sulphate through to battery cells will be in China (before factoring in Tesla’s Battery Day ambitions).",{"type":574,"attrs":707,"content":708},{"textAlign":49},[709],{"text":710,"type":579},"Nickel projects that are outside of the control of China, may still gain support by the battery/auto industry, even if they are not as competitive as the Chinese controlled supply sources (including Indonesia). There may well be a premium paid to diversify supply sources.",{"type":574,"attrs":712,"content":713},{"textAlign":49},[714],{"text":715,"type":579},"The second issue, which grows in importance, seemingly by the day, relates to the second element of Elon Musk’s challenge, which was to produce nickel that is “environmentally friendly”. Many commentators (and competing nickel producers) have been quick to highlight the environmental challenges in the nickel project line-up for the battery market, particularly the Indonesian projects.",{"type":574,"attrs":717,"content":718},{"textAlign":49},[719],{"text":720,"type":579},"Some non-nickel sulphate products in nickel have even more impact on the environment (see Fig 6 for some broad-brush averages). There is a considerable range of CO2 impacts even within the product categories and the crystallisation and transportation of NiSO4 (as opposed to using it in liquid form to directly make precursors onsite) will increase its CO2 footprint. The CO2 generation from the Indonesian nickel pig iron projects, while not listed in the charts, is thought to be substantially higher than for ferronickel.",{"type":574,"attrs":722,"content":723},{"textAlign":49},[],{"type":574,"attrs":725,"content":726},{"textAlign":49},[727],{"text":728,"type":579},"The main “objections” to Indonesian-produced nickel include issues with mining rehabilitation (as does the Philippines), the use of coal-fired power and the proposed disposal of tailings from the HPAL process by in the deep ocean by some of the projects (known as DSTP – deep sea tailings placement).",{"type":574,"attrs":730,"content":731},{"textAlign":49},[732],{"text":733,"type":579},"Some auto buyers have already stated that they will not accept batteries made with nickel made using DSTP. The EU Commission is also proposing to impose a CO2 import tax for products with a high-carbon footprint.",{"type":574,"attrs":735,"content":736},{"textAlign":49},[737],{"text":738,"type":579},"The solving of the DSTP issue is easier than removing coal from power stations, particularly in Indonesia, which is the world’s largest coal exporter. The use of fossil fuels to make electricity, of course, is not just an issue with Indonesian nickel but with most metal products made in China and many other countries. It is not going to be “solved” any time soon.",{"type":574,"attrs":740,"content":741},{"textAlign":49},[742],{"text":743,"type":579},"The HPAL process generates substantial waste production with a 50ktpa nickel project generating 10mt of waste a year.",{"type":574,"attrs":745,"content":746},{"textAlign":49},[747],{"text":748,"type":579},"Tailings can be treated by one of three methods: a tailing dam, dry-stacking of waste (DST) and DSTP.",{"type":574,"attrs":750,"content":751},{"textAlign":49},[752],{"text":753,"type":579},"None of the methods are without issues. Tailings dams have been in focus recently with the recent tragic dam ruptures in Brazil and China (in iron ore and molybdenum); Indonesia is a county of high seismic activity and is not necessarily an ideal location to build tailings dams, particularly near villages and towns.",{"type":574,"attrs":755,"content":756},{"textAlign":49},[757],{"text":758,"type":579},"DSTP runs the risk of leakages in pipelines to the ocean and upwelling of tailings from the ocean. The only nickel plant to currently practice this, Ramu in Papua New Guinea, had a well-publicised leakage last year, although it should be added that all three solutions have pipelines that potentially could leak and all three involve some disposal of waste in the ocean.",{"type":574,"attrs":760,"content":761},{"textAlign":49},[762],{"text":763,"type":579},"Dry stack tailings incur a significantly higher capital and operating cost (VNC in New Caledonia is spending $500m to convert its operation from a tailings dam solution to DST) and there are potential environmental issues with stack stability and erosion.",{"type":574,"attrs":765,"content":766},{"textAlign":49},[767],{"text":768,"type":579},"The use of dry stack tailings or tailings dams appear to be the likely solutions to making this process acceptable to the battery and auto producers and we believe DST will ultimately be adopted by most Indonesian producers. Indeed, we have now heard that all three projects in Indonesia currently under construction have recently dropped their plans to use DSTP, presumably in favour of DST.",{"type":574,"attrs":770,"content":771},{"textAlign":49},[772],{"text":773,"type":579},"There are two Indonesian projects that currently propose to convert nickel pig iron into nickel sulphate by making a nickel matte product that can be refined into class 1 nickel or nickel sulphate. This is an expensive route relative to HPAL (due mainly to low cobalt recovery) and is very energy intensive with coal the fuel used to make electricity. It has a high carbon footprint and it is still not clear whether this will be acceptable to the auto industry outside China. It may be necessary, however, if the demand for nickel in battery grows even faster than current consensus forecasts.",{"type":574,"attrs":775,"content":776},{"textAlign":49},[777],{"text":778,"type":579},"Another issue affecting most laterite projects is deforestation to access ores, erosion, and potentially inadequate rehabilitation after mining (many of the miners are small scale and simply “disappear” at the end of mining). These issues require strict government regulation and enforcement and best practice (such as at Sumitomo Metal Mining’s two operations in the Philippines) suggests that the challenges can be overcome.",{"type":574,"attrs":780,"content":781},{"textAlign":49},[782],{"text":783,"type":579},"There are few realistic alternatives to Indonesia at current nickel prices if the large volume growth targets for the battery market are to be met. There are no other countries with the reserve base and grade of laterites to match Indonesia. However, like lithium, there is a lot of low-grade nickel laterites in the earth’s crust. Higher nickel prices could potentially incentivise the development of laterite ore bodies elsewhere, including the Philippines, the South Pacific, South America, Africa, and Cuba.",{"type":574,"attrs":785,"content":786},{"textAlign":49},[787],{"text":788,"type":579},"Another medium-term development, at the right price, could be the mining of nickel from polymetallic nodules on the sea floor. However, this also has environmental challenges.",{"type":574,"attrs":790,"content":791},{"textAlign":49},[792],{"text":793,"type":579},"Globally, nickel production from sulphide ores has been declining over the past decade and most new mines are needed to replace existing ore bodies where reserves will be depleted in the coming years. Many of the junior mining projects in North America and Australia can justifiably claim to have a lower carbon and environmental footprint that the Indonesian projects but they are significantly more expensive in capital and operating costs that planned Indonesian projects and realistically can only make a marginal contribution to the growth requirement of approaching 1mtpa of new nickel units over the next decade.",{"type":574,"attrs":795,"content":796},{"textAlign":49},[797],{"text":798,"type":579},"These smaller projects will no doubt get some traction from their environmental credentials but ultimately the market requires Indonesia to get it “right” if a nickel shortage in the second half of this decade is to be avoided.",{"type":574,"attrs":800,"content":801},{"textAlign":49},[802],{"text":803,"type":579,"marks":804},"This article was written by Jim Lennon, Managing Director of Red Door Research Ltd and Senior Commodities Consultant to Macquarie Commodities Strategy.",[805],{"type":806},"italic","Nickel has often been the overlooked raw material for batteries with much attention focused on lithium and cobalt. For the nickel industry, batteries are still a relatively minor end-use, accounting for around 5% of end-use demand with demand still dominated by stainless steel demand, which was 70% of demand in 2019. While the nickel industry […]",[809],{"slug":562,"name":563,"content":810},{"job_title":565,"image":811,"bio":568,"linkedin":569},{"filename":567},"\u003C!--#storyblok#{\"name\": \"article\", \"space\": \"\", \"uid\": \"b746ec25-59df-4bb3-ae56-b0354a775b34\", \"id\": \"\"}-->","article",[815,818],{"slug":816,"name":817},"critical-minerals","Critical Minerals",{"slug":819,"name":150},"nickel","private",{"id":49,"alt":822,"name":822,"focus":822,"title":822,"source":822,"filename":823,"copyright":822,"fieldtype":824,"meta_data":825,"is_external_url":51},"","https://a.storyblok.com/f/287943243085208/d3153c6c18/bm-nickel-in-the-limelight.jpg","asset",{"alt":822,"title":822,"source":822,"copyright":822},"Nov 04, 2020","4th November 2020",[],[],1792773938415]