Half of Global Nickel Supply Suitable for Electric Vehicle Batteries

The other half, which includes ferronickel and pig iron grades, will not be suitable for use in lithium-ion batteries, says UBS.

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Nickel is quickly gaining attention for its role in electric vehicle batteries, but according to analysts at UBS (NYSE:UBS), not all nickel is suitable for this application.

In fact, the firm told Reuters this week that about half of the world’s nickel supply, including ferronickel and pig iron grades, will not be suitable for use in lithium-ion batteries.

Currently, some of the largest producers of the higher-grade ores include major miners BHP Billiton (NYSE:BHP,ASX:BHP,LSE:BLT), Norilsk Nickel (MCX:GMKN), Vale (NYSE:VALE) and Sumitomo (TSE:8316), which are moving to secure supply contracts quickly.

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Australia’s Independence Group (ASX:IGO) and Western Areas (TSX:WSA, ASX:WSA), which are building plants to produce nickel sulfate, a powder suited for batteries that regularly commands a price premium over LME-traded nickel, are also expected to benefit, Reuters says. 

Western Areas Chief Executive Dan Lougher told the news outlet that his company has met with battery manufacturers and found that “they are quite specific on their requirements. Nickel is an important component of these batteries.” He added, “[n]ot everyone will be a winner.”

Demand for nickel sulfate for lithium-ion batteries is forecast to increase by 50 percent by 2030, to 3 million MT, Saad Rahim, chief economist at Trafigura Group, recently told Bloomberg.

Earlier this week, LME CEO Matthew Chamberlain said the LME is considering starting a nickel sulfate contract as part of a trio of new products to take advantage of the rising demand for battery metals. However, he noted that a launch is at least 18 months away.

Benchmark LME nickel prices have risen by 17 percent year-to-date to reach $11,725 per tonne.

Plants that have been shut down due to low nickel prices may get a second chance if prices continue to gain, Reuters saysBrazil’s Votorantim Metais (TSX:NEXA,NYSE:NEXA), which recently changed its name to Nexa Resources, and First Quantum Minerals (TSX:FM,LSE:FQM) in Australia could restart operations if the environment remains favorable.

UBS estimates that by 2025 there will be 15 million electric vehicles on the road, which will boost nickel demand by 300,000 to 900,000 tonnes, or around 10 to 40 percent of the current market.

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Securities Disclosure: I, Melissa Shaw, hold no direct investment interest in any company mentioned in this article.

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