Electric-car push bumps up against chaos in nickel market

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Squeeze on margins

“Nickel can be a volatile beast,” said William Adams, head of base metal and battery research at Fastmarkets in London.

Here’s how the math works. A 100 kilowatt hour battery needs about 145 pounds of nickel, according to BloombergNEF. Last year’s average price was about $US18,500 per metric tonne, Adams said. That means about $US1,200 of nickel in every battery. At $US29,000 per metric ton, where it closed Friday before the worst of the short squeeze, that same battery needed more than $US1,900 in nickel. It’s not a huge jump, but carmakers don’t like to see the cost of one material go up by $US700 a vehicle.

‘Nickel is the single biggest component in terms of cost. So any change will have a significant impact.’

Sam Abuelsamid, principal research analyst at Guidehouse Insights

Carmakers do lock in long-term supply contracts and can avoid price hikes on the spot market for a while, but if higher pricing persists, then they will be paying more.

New sources are coming on line in Indonesia, and Russian nickel will find its way out to China and other nations that aren’t using sanctions or boycotts, but Adams sees prices remaining elevated this year. He expects the metal to trade in the $US20,000 to $US25,000 per tonne range this year and could average around $US22,000. He has not updated his forecast yet, though.


That will put a squeeze on the margins of an already profit-challenged part of the market and could entice auto companies to hasten their move toward other metals.

Last year, Tsingshan, the world’s largest nickel producer, started shipping its first cargo of so-called nickel matte. It’s a new way to make nickel for batteries that analysts including BNEF’s Allan Ray Restauro and Kwasi Ampofo say may open up a big supply route from low-grade ore mines for EVs.

While capacity is limited at the moment, Tsingshan had shipped its first batch of nickel matte for electric-car batteries from its Indonesia plant, with three production lines under operation with monthly capacity of 3,000 tons, researcher Mysteel reported in January.

The new process, if followed by other nickel-pig-iron producers, will likely add more to supply for battery-grade nickel, according to BNEF’s Restauro.

Restauro expects the conversion from nickel pig iron to nickel matte to accelerate, although this requires nickel prices to remain elevated for medium to longer-term as this would require additional capital to invest in change over existing furnaces.


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