Nickel at 10-year high, but for how long?

Nickel

The nickel price broke a 10-year high this week, at $US21,680 ($29,765) per tonne for the first time since September 2011 as reports of dwindling battery metal supplies worried investors.

The record followed the lows of 2020 after COVID-19 battered markets and the nickel price fell to around $11,200 per tonne in April that year.

However, with the demand for battery metals rising with the uptake of electric vehicles, analysts from leading investment bank Goldman Sachs suggest a nickel deficit of up to 30,000 tonnes could have an effect on prices in 2022.

Fitch Solutions recently forecast a slowdown in the battery metal’s prices to begin 2022 before a steady rise from 2023-2027.

“Ultimately, higher prices will be sustained by persistent annual production deficits,” Fitch stated.

“Demand growth will be driven by expanding global battery production to supply the electric vehicle and utility storage industries over the coming years.”

Fitch also suggested stronger production growth will also be supported by technical advances in converting lower-grade Class 2 nickel ore into higher-grade Class 1 for use in the battery industry.

Alternatively in the long term, a shortage of Class 1, battery-grade nickel may encourage automakers to explore lithium-iron-phosphate (LFP) batteries for mass-market vehicles, which could negatively affect the nickel price.

In February 2021, Tesla chief executive officer Elon Musk said that nickel remains the firm’s biggest obstacle to successfully scaling lithium-ion cell production and has prompted Tesla to shift its standard range vehicles to contain LFP cathodes.

The firm also reached an agreement in March 2021 to source raw materials from the Goro nickel mine in New Caledonia for its batteries by serving as a technical and industrial partner.

This signifies the continuing preference for nickel-heavy batteries due to higher energy density properties.

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