Developments in the battery sector are fundamentally reshaping the nickel supply chain. Nickel has several mature applications in nickel metal-hydride (NiMH) and nickel-cadmium (NiCd) batteries but nickel consumption in batteries has thus far not exceeded 5% of total consumption. However, demand for nickel in lithium-ion batteries will soon make batteries the second-largest end-use application for nickel.
The major worldwide push to promote electric vehicles as a way of cutting emissions from fossil-fuelled vehicles has already resulted in increased primary nickel consumption in lithium-ion. Chinese incentives and regulations have steered battery producers and OEMs towards higher energy density batteries and longer-range options and nickel bearing NCM and NCA cathodes are thus expected to be dominant cathode technologies throughout the next decade.
However, the road to electrification will be a bumpy one. Primary nickel demand from the battery sector grew more slowly in 2019 than in 2018 due mainly to lower electric vehicles sales growth following the Chinese government’s withdrawal of EV subsidies. The long-term outlook for nickel demand in batteries remains strong, but over the shorter-term more sluggish EV demand growth and a slower-than-expected adoption of NCM811 technologies will keep consumption growth rates in check.
In line with an uncertain demand and supply situation, prices have been volatile. Like nickel metal prices, nickel sulphate prices fluctuated considerably in 2019, reflecting the spill over effect of key changes taking place in the nickel market, but more specifically, driven by their own market fundamentals as well as seasonality factors. Premia, too, changed considerably. In May it became unviable for nickel sulphate production from powder and briquette, and from mid-July, production from MHP has also turned unprofitable in China, the largest producing and consuming country globally. This led some sulphate plants to either reduce production or switch to production of nickel cathode. It is likely that volatile will remain a feature of the market as it reconfigures.
In the future, it is clear that new capacity for nickel sulphate production will be required and the supply chain is already responding. Processing capacity is rapidly being added by ramp up of integrated producers (likes of Jinchuan and SMM), by conversions of existing plants (likes of BHP Nickel West and Terrafame), and through new third-party processors (likes of Thakadu Battery Materials). Over the next decade it is expected that other existing producers may also convert to sulphate production.
A key question facing the market is where the feedstock for nickel sulphate production may come from. Nickel sulphate can be produced by using a variety of feedstock material, such as crude nickel sulphate, briquettes, mixed sulphide precipitate, mixed hydroxide precipitate, carbonyl pellets and powder or recycled materials. Production of these feedstock materials is going to have to grow to satisfy the growing demand for nickel sulphate by the battery industry.