In recent memory and even today, nickel has predominately been used to drive the rapid modernisation of developing economies, most notably China and India.
The growth of the construction, infrastructure and manufacturing industries has increasingly necessitated higher supply of the commodity, according to CRU senior consultant for non-ferrous Toby Green.
“The main consumer of nickel by far is the stainless-steel market, accounting for about 71 per cent of all demand for nickel units today,” he says
“Demand for stainless steel is still growing healthily, as economies like India and China increasingly generate and purchase consumer goods and appliances.”
Looking forward, however, a potential boom in the nickel industry emanates from the growing electrical vehicle (EV) market, with demand expected to steadily increase for the highly sort after nickel sulphate.
“The rising demand for nickel, and particularly sulphate for use in EVs, necessitates more laterite-HPAL (high pressure acid leaching) projects and many of these need slightly higher nickel prices to bring them online,” Green says
HPAL is a process used to extract nickel from laterite ore, with its main advantage being the ability to process low grade nickel laterite ores and its high and separate recovery of nickel and cobalt.
The issue with HPAL projects, however, is they are expensive and according to Green, nickel prices must first spike before companies are willing to invest in HPAL.
While Green notes that batteries for EVs “are still very much a niche user” of nickel, this is changing as the market takes off.
Many of the major EV manufacturers tend to use lithium-ion batteries, using a cathode that is primarily composed of nickel and mining companies around the world are responding.
BHP, for example, announced in May it will retain its Nickel West business given the emergence of EVs, coupled with a market preference for high nickel intensity battery chemistries.
The rarity of nickel sulphate deposits has BHP expecting big things from its Nickel West operations.
Its sales to the battery sector already exceed 50 per cent, while its powder sales to China are growing rapidly.
Nickel sulphate production has also further increased battery sector sales in 2019, with 90 per cent of all sales from Nickel West expected to go to the battery sector over the next two years.
For Nickel West asset president Eddy Haegel, the growth of the EV market represents “a great moment for the nickel industry in Western Australia.”
“We are on the cusp of a revolution in the way energy is stored and used around the world and we want to be a part of the growth of that market as electrification and the rollout of electric vehicles happens,” he tellsAustralian Mining.
Given the anticipated increase in demand for nickel, it begs the questions of whether supply can keep up, with the major players of the industry needing help, according to Green.
“Most of the current majors (Vale, Glencore, Jinchuan, etc) are predominantly sulphide producers (as opposed to laterite) and have expanded their production as far as reasonably possible,” he says.
“A lack of significant new sulphide discoveries means that most new supply is expected to come from nickel laterites, where the major undeveloped resources are spread across a number of new entrants and juniors in regions like Australia, Indonesia and Africa.”
Galileo Mining, which listed on the ASX in May last year, is one of those new entrants advancing nickel prospects.
While still in the exploration phase, the company has generated some quality nickel-copper targets in Western Australia’s highly prospective Fraser Range region, where it is conducting maiden drilling.
For Galileo’s managing director Brad Underwood, its portfolio of nickel and copper offers high growth potential for the junior mining company.
“We are fortunate that Galileo is positively leveraged to growth in electric vehicles and battery storage through its nickel-copper and cobalt assets,” he says.
“The increasing focus on electrical technologies such as EVs and batteries can only positively affect nickel growth forecasts; cobalt and copper also have compelling market fundamentals, with global usage estimates continuing to improve significantly for both commodities.”
A lithium-ion battery comprised of nickel, manganese and cobalt is another popular choice in the EV market that is used by Chevrolet and Nissan.
According to S&P Global, this battery has a cathode that is typically made up of 60 per cent nickel, 20 per cent manganese and 20 per cent cobalt. Many manufacturers are, however, moving towards batteries with cathodes containing 80 per cent nickel.
The attraction to batteries with higher levels of nickel derives from its ability to provide increased energy density, while also extending vehicle range.
Western Areas is a mid-tier producer and developer that has taken notice of the potential in cobalt and nickel sulphide.
The Perth-based company approved the Odysseus underground nickel project in Western Australia last year with plans to supply the EV market.
Western Areas managing director and chief executive officer Dan Lougher expects China’s demand for nickel to continue given the Asian country’s lack of domestic sulphate projects.
“China doesn’t have enough nickel internally so they’ve always a been net importer so there’s strong competition to supply,” Lougher says.
“Our view is though there are no new large operations coming in for nickel sulphide mines so given we’re in that field now, we should be a net benefactor.”
While optimistic, Lougher remains cautious of the volatility of the commodity market, suggesting the growth in nickel sulphide prices will also depend on regulation in the Chinese market.
“The change for us will be how China ramps up new policies which extends to making EV’s affordable for everyone” he says.
“Historically, China used half of the world’s nickel production, so they have to import, and we’ve worked with them for the last 10 years.”
While more Australian companies are looking to break into the nickel market, Green notes that in order to successfully supply more of the commodity, they need financial backing.
“The hesitation of financial institutions to put forward the considerable capital for large Australian HPAL projects will allow more dynamic Chinese enterprises to get off the ground in Indonesia and elsewhere,” he says.
“This is not so much an issue for the industry at-large as it is unfortunate for the Australian producers, who are otherwise blessed with excellent natural resources.”
It provides another example of China increasing its command over an important raw materials supply chain, which can be seen as “presenting sovereign risk,” according to Green.
China’s Tsingshan Group has already started to assert its ascendency on the nickel industry after last year surprising the market with a low-cost estimate and short construction time-frame of a $700 million HPAL plant.
Its plans were with partners on the Indonesian island of Sulawesi and included ambitious project targets including 131,000 tonnes of nickel sulphate crystals by 2020.
For the time being though, it seems the Australian nickel industry will sit and wait for the anticipated EV boom, ensuring it has the resources to capitalise should it eventuate.