Nickel Miners Prepare to Meet Electric Vehicle Demand

Nickel-focused companies continue to evaluate how they can profit from anticipated demand from the electric vehicle sector.

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The lithium-ion battery boom is expected to increase the need for nickel, and nickel-focused companies continue to prepare to meet that demand.

In August, major miner BHP Billiton (ASX:BHP,NYSE:BHP,LSE:BLT) announced plans to commit $43 million to build the world’s largest nickel sulfate plant in Australia. The company said at the time that only 10 percent of its nickel output is currently consumed by the battery market, but it believes that amount could rise to 90 percent in five or six years.

More recently, Sherritt International (TSX:S) Chief Executive David Pathe said his company is considering the economics of building a plant to produce nickel sulfate. The powdery substance is particularly suited to battery applications, and the company is also looking at “what other forms of nickel may be most desirable to battery makers” as the industry evolves.

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New mines are starting to come online as well, with Independence Group (ASX:IGO) formally opening its $456-million Nova nickel mine in Perth last Friday (September 8). The mine has been in commercial production since July, and is currently ramping up to its full capacity of 125,000 tonnes per month.

The company has offtake agreements with BHP and Glencore (LSE:GLEN), but those agreements will expire within three years — according to Managing Director Peter Bradford, Independence Group is already receiving calls from battery manufacturers interested in securing a source of nickel.

Nickel is becoming more attractive to lithium-ion battery makers because it is cheaper than cobalt, whose price has risen steeply in 2017. Although nickel reached its highest price in over two years last week, it is still recovering from an extended downturn that resulted in the closure of a number of mines.

Bradford also emphasized that even though nickel prices are now trading higher, not every mine will be successful — indeed, Independence Group still plans to close its Long nickel mine. “Even at the prices we have got today, for the average nickel sulphide project we are not at an incentive price,” he said.

“Wood Mackenzie recently envisaged an incentive price for new nickel production well above $US20,000 a tonne,” he added, noting that reports from Indonesian producers indicate that they will not restart operations until prices rise above $30,000.

He believes overall the effects of electric vehicle demand aren’t being felt in the nickel market yet, and thinks supply will tighten further in the future. Morgan Stanley (NYSE:MS) estimates that by 2050, 81 percent of new vehicle sales will be electric cars.

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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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