Like copper, the surge in renewables is changing demand for nickel for the better.
So much so that global primary nickel demand is forecast to be 25% higher by the end of 2022 than it was in 2020, thanks to rising demand for renewables and some speciality steels.
According to the latest forecasts from the International Nickel Study Group (INSG), demand for the metal will rise to 2.8 million tonnes this year and to 3 million tonnes next year, up from 2020’s 2.4 million tonnes.
Like copper, there’s a lot of interest in finding nickel. Besides BHP’s born-again enthusiasm in WA and Canada, miners like Western Areas, IGO, Mincor, Poseidon, Chalice (in conjunction with PGE minerals), Azure Minerals and Rox Resources are looking for or have found major deposits or prospects that are helping drive investor enthusiasm.
The INSG forecasts rises in primary nickel production to 2.6 million tonnes this year and 3.1 million tonnes next year, resulting in a projected nickel deficit of 134,000 tonnes this year and a surplus of 76,000 tonnes in 2022. Nickel production in 2020 was 2.5 million tonnes (a surplus of 107,000 tonnes thanks to weak demand from the pandemic lowering demand).
Worldwide nickel demand has more than doubled from 1.1 million tonnes in 2000 to 2.4 million tonnes in 2020, (for annual average growth rate of 3.8% over the two decades).
Asia remains by far the largest market for nickel, representing around 82% of global demand.
China alone accounts for almost 60% of worldwide nickel demand, up from 5.5% in 2000. Demand from the battery sector in China is going to maintain the country’s dominant buyer role, but battery factories are being built elsewhere, especially in the US (all the car makers have plans, along with the likes of Tesla) and Europe.
The Group warned that its estimates do not factor in possible production disruptions in China and Indonesia.
Exports of unprocessed nickel ore from Indonesia, the world’s top nickel miner, ended in January 2020, due to a government-imposed ban.
The move has meant that China has less nickel ore to feed its nickel pig iron (NPI) sector, resulting in lower NPI production in the country.
However, INSG points to the ramp up of new NPI projects last year as well as high pressure acid leaching (HPAL) projects being developed in Indonesia and other countries, which could increase nickel output.
Nickel’s dominant use is in stainless steel and the International Stainless Steel Forum (ISSF – a group affiliated with the INSG) says stainless steel production increased by 24.9% year-on-year from 23.2 million tonnes in the first half of 2020 to 29.0 million tonnes in the first half of 2021.
China saw the largest increase in the first half of 2021, with year-on-year stainless steel melt shop production rising 20.8% from 13.4 million tonnes to 16.2 million tonnes. Strong growth is anticipated for the rest of 2021, despite announced production cuts in China, and a further increase is expected for 2022.
A recent study from S&P Global echoes the bullishness in the INSG outlook.
S&P says nickel demand will benefit from both rising passenger PEV (Plug-in Electric Vehicle) sales and higher usage in passenger PEV batteries as “producers seek to maximise driving ranges, especially for more premium vehicles.”
“We forecast primary nickel consumption in PEV batteries to increase at a CAGR (Compound Annual Growth Rate) of 26.2% between 2021 and 2025, from an estimated 178,000 tonnes to 451,995 tonnes over the period (from an estimated 99,640 tonnes this year).
“We consequently expect passenger PEV batteries’ share of global primary nickel demand to grow from 6.4% in 2021 to nearly 13% in 2025. Global EV producers such as Tesla, however, have expressed concerns regarding the shortage of environmental, social and governance-friendly battery-grade nickel for use in lithium-ion batteries.”
S&P said that producers and refiners had to address this shortage otherwise it will “allow technologies such as LFP (Lithium Iron Phosphate) to gain market share at the expense of nickel-containing batteries, which would have a negative impact on nickel demand from passenger PEV batteries in the long term.”
“Cobalt and nickel are key metals used in lithium-ion battery cathodes, with the former to ensure battery stability and safety, while the latter enhances energy density and vehicle range.
“Cobalt has a range of metallurgical applications including super-alloying, hardened cemented carbides and plating; usage in the chemical sector includes PEV batteries, electronics, catalysts, other batteries, ceramic dyes and tires.
“In particular, the shift to more nickel-intensive NMC batteries has been driven by cobalt’s comparatively high cost and supply concentration risks, as well as from nickel’s ability to increase battery energy density.
“With around 70% of global cobalt supply coming from Democratic Republic of Congo, the inherent risks to the supply chain have prompted battery makers to reduce the amount of cobalt used in lithium-ion batteries. The broader adoption of nickel-intensive batteries, however, has been hampered by safety concerns, with numerous reports of vehicles catching fire.
“We expect continued relevance of cobalt in PEV battery chemistries in the foreseeable future and forecast global cobalt demand in PEV batteries to increase from 24,520 tonnes in 2020 to 45,857 tonnes in 2021 and 85,347 tonnes in 2025.
“Our recent scenario analysis, however, suggests that future cobalt demand could be drastically lowered by the higher uptake of low- or no-cobalt batteries,” S&P Global said in the study released in September (we looked at $&P Global’s copper outlook last week).
But the real growth will come in upgrading nickel to battery ready products – as S&P Global notes. That’s why BHP has built capacity to make nickel sulphate crystals, while other companies have plans for even grade material (there’s a plan for a special refinery in Kalgoorlie).