Nickel Prices Surges To Decadal High On The Back Of Rising EV Demand But New Mining Projects Promises To Ease Supply

Nickel prices surged to a decadal high late last week with London Metal Exchange (LME) reporting low inventories even as investors bet on automakers scrambling to secure supplies for the metal that is a critical component in the production of electric vehicle (EV) batteries.

On LME, the three-month nickel contract ended at $21,500 a tonne on Tuesday, while the metal was offered at $21,680 for cash. On LME Select, nickel was quoted at $21,950 on Wednesday morning.

Increasing Use Of Nickel In Lithium-ion Battery

The lithium-ion battery has seen significant advancement in recent years, owing largely to the chemistry of the cathode, which continues to trend toward higher quantities of nickel.

The use of nickel in lithium-ion batteries lends a higher energy density and more storage capacity to batteries. This improved energy density and storage capacity means that electric vehicles can get more miles out of a single charge, a concept that has been a key challenge for widespread EV adoption.

Even though use of nickel in EV and batter storage is expected to jump 20% by 2025, the demand for Nickel is still largely driven by its use in stainless steel. Stainless steel accounts for about two-thirds of global nickel consumption estimated at around three million tonnes this year.

Supplies Likely To Improve

The global supply of nickel amounted to about 2.53 million metric tons in 2020. It is estimated that the supply of this base metal will increase to approximately 3.24 million metric tons worldwide in 2022.

Anglo-Australian mining giant BHP announced that it will be investing $50 million in Kabanga Nickel project in west Tanzania.

Kabanga’s deposit contains in-situ nickel equivalent resources estimated at 1.86 million tonnes. First production is anticipated in 2025, targeting minimum annual nickel production of 65,000 tonnes during the estimated 30 plus years of the mine’s life.

US nickel miner Talon Metals announced recently that it has signed a agreement with Tesla for delivery of at least 75,000 tonnes of nickel concentrate over a period of six years.

A joint venture with Rio Tinto, Talon will source nickel from its high-grade Tamarack Nickel-Copper-Cobalt Project located in central Minnesota. The Tamarack Nickel Project comprises a large land position (18km of strike length) with numerous high-grade intercepts outside the current resource area.

Chinese nickel and stainless steel giant Tsingshan Holding Group has also began supplying nickel matte for country's EV makers.

Tsinghan is also making significant investments in Indonesia. Indonesia which holds the world’s largest nickel reserves and is leveraging those reserves to attract investment in the battery supply chain.

Indonesia's nickel strategy envisages creating an integrated EV supply chain (from mining and processing to battery production and eventually EV production).

Indonesia’s first plant to process nickel for use in batteries was commissioned in May 2021, with at least seven more projects in the pipeline.