Column: Electric dreams turn into a nightmare for battery metals
A sector that was once racing to build new supply has been closing mines and deferring projects as low prices bite into the cost curve.
The price of nickel held onto nine-month highs on Tuesday as focus in the industry shifts to supply of the metal for the burgeoning electric vehicle market, and mine production declines hit double digits.
On the LME, nickel was exchanging hands for $14,925 a tonne ($6.77 a pound), the highest since mid-November last year and up by more than a third from its March lows.
The Lisbon-based International Nickel Study Group reports global mined nickel fell 7.7% in June compared to the same month last year, which still counts as something of an improvement from the sharp falls in April and May.
Year to date production has fallen by more than 10% to 1.1 million tonnes due to covid-19 related disruptions in major producing regions including Philippines (–28% drop in output year-on-year), Canada (–19%) and Indonesia (–11%).
Benchmark Mineral Intelligence, a price discovery agency for the global battery supply chain on Tuesday launched a first of its kind nickel price as demand from the EV sector reshapes the nickel industry, currently dominated by stainless steel.
“Mixed Hydroxide Precipitate (MHP) nickel is rapidly becoming a focal point as a raw material input to the nickel chemical industry and is set to see further uptake as supply from new projects enters the market.”
MHP is an intermediate product of nickel metallurgy derived from laterite ores, which contains both nickel (typically 34-55% Ni content) and a small amount of cobalt (typically 1-4.5% Co content), according to Benchmark.
The CEO of EV pioneer Tesla, Elon Musk, in July promised a “giant contract for a long period of time” to environmentally responsible nickel mining companies. Nickel destined for EVs is expected to make up 30% of the market longer-term versus a fraction of that now.
Existing suppliers have far from a clean record. Norilsk Nickel has been fined billions for a diesel spill in Russia’s arctic and Metallurgical Corp of China’s Ramu plant that spilled mine waste into Papua New Guinea’s Basamuk Bay a year ago is facing similar pressure from locals and environmental groups.
New projects to feed the EV supply chain are primarily in Indonesia at operations that use high pressure acid leaching (HPAL) to extract nickel and cobalt from these low-grade ores.
Like Ramy, many of these use deep-sea tailings as a means of waste disposal.
“For new nickel supply, Elon and the battery industry look to HPAL in Indonesia,” Simon Moores, founder and managing director of London-based Benchmark Minerals, told Bloomberg.
“Yet deep water disposal methods are increasingly putting these mines on the same black list as illegal artisanal cobalt from the DRC.”
