The global green transition and electrification of transport has started a paradigm shift in the demand dynamics of metals, which are required for a low-carbon future, and are set to experience a significant boost in demand in the coming decade at least, says research agency Fitch Solutions.
Battery-grade nickel, or Class 1 nickel (which contains more than 99.8% nickel content), used in rechargeable batteries is a major beneficiary, especially as the configuration of lithium/nickel/manganese/cobalt (NMC) oxide batteries used in electric vehicles (EV), is changing, with a shift from a 1:1:1 ratio (meaning nickel, manganese and cobalt were used in the same proportion) to 5:3:2, and then to the latest 8:1:1 (with eight parts nickel to one part of manganese and cobalt each).
In fact, Fitch Solutions says Class 1 nickel “will see demand outstripping supply in the
coming years as EV production and adoption accelerate”. It attributes this to a severe lack of sufficient new Class 1 nickel mining projects in the pipeline and strong EV production and sales forecasts by the agency’s autos team.
Fitch Solutions’ autos team forecasts EV sales to increase from the 5.6-million units sold this year to 26.7-million units sold in 2030 and sees strong upside risks to these estimates.
The team explains that Class 1 nickel supply suitable for battery production represents about half of global supply, although less than 20% is available to be processed into powder and briquettes that could be used to produce nickel sulphate.
With Class 1 nickel to experience a major demand boost from the green transition, the main impediment facing the market is sufficient Class 1 supply and the main game changer would be the successful conversion of Class 2 nickel (with less than 99.8% nickel content) to Class 1 nickel.
However, at present, Fitch Solutions says, global production of nickel is roughly equally divided between Class 1 (46% of global) and Class 2 (54% of global), and that, in terms of global nickel demand, about 74% stems from stainless steel production, which can use both
Class 1 and 2 nickel, while only between 5% and 8% of demand currently stems from batteries that require only Class 1 nickel as the quality and performance of batteries depend on the quality of nickel used to make them.
Class 2 nickel, on the other hand, is produced from saprolites and limonites, which are popular for their use in the stainless steel industry due to their iron content and potentially low production costs.
“Indeed, the presence of iron and other contaminants, including copper, that need
to be separated, are the main concerns with regard to the quality of nickel, differentiating between Class 1 and 2 nickel.”
Fitch, therefore, expects demand from batteries for Class 1 nickel to accelerate dramatically in the coming decade at least.
However, ultimately, how rapidly a potential shortfall in Class 1 nickel supply emerges will depend on several factors, including the speed of EV adoption, the choice of battery technology, mining companies’ willingness to restart Class 1 production projects after many were idled during the last five years owing to low prices, the potential for technology breakthroughs in cost-competitive refining of nonferrous Class 2 products and the potential for increased Class 1 nickel recycling.
“We believe miners will increasingly be pressured to meet technical and sustainability criteria surrounding battery metals, as various jurisdictions define requirements and restrictions in relation to the raw materials they use,” the agency says.
It expects the battery market will gradually demand a differentiated range of metal products in terms of their quality and impurities, while simultaneously necessitating that these products are “clean” from both a social and environmental standpoint.
In particular for the battery-grade nickel sector, from a greenhouse-gas (GHG) emission
perspective, a recently completed study by Energetics found that high-pressure acid leach perations produce 24 kg to 27kg of carbon dioxide-equivalent for every 1 kg of nickel produced.
Fitch Solutions says this compares “unfavourably” with sulphide operations, which range from 8.8 kg to 18.8 kg of carbon dioxide-equivalent for every 1 kg of nickel produced.
For HPAL, about one-third of the carbon emissions can be attributed to imported electricity, one-third to acid neutralisation using limestone and one-third to logistics and other reagents.
As the spotlight on environmental, social and corporate governance intensifies, Fitch says “there is no evidence to suggest that navigating through these environmental and social challenges will be any easier for the next generation of laterite mining operations”.