Vedanta to exclude base metals business from sweeping demerger
The group said it will consider the base metals business demerger at a later stage.
“Electric vehicles excepted” by Jonny Brownbill is licensed under CC BY 2.0
* Growing use of nickel, which allows longer charge, in batteries
* Not all nickel suitable for electric car batteries
* BHP, Sumitomo among first movers
By James Regan and Melanie Burton
SYDNEY/MELBOURNE, Oct 31 (Reuters) – Battery makers are increasingly turning to nickel to help power growing global electric car sales, but only half of the world’s producers of the metal are likely to benefit, mining analysts and executives say.
Lithium batteries containing nickel, which helps keep a charge over longer distances, are being installed in electric cars from Tesla’s top-of-the-line Model X to General Motors Co modestly-priced Chevy Bolt.
The battery boom promises a new and growing market for miners producing high-grade nickel products. However, half the world’s supply of the metal, comprised of so-called ferronickel and nickel pig iron grades, is unsuitable for battery production, according to analysts at UBS.
Some of the biggest producers of the higher-grade ores, including BHP, Norilsk Nickel, Vale and Sumitomo Corp, are moving quickly to take advantage and seal long-term supply deals with battery producers.
Smaller producers with ores suitable for batteries, such as Australia’s Independence Group and Western Areas also stand to win.
These producers are building plants to convert the metal into a powder-like sulfate that is particularly suited for use in batteries. Sulfate nickel regularly fetches a price premium over London Metal Exchange-traded nickel.
“Not everyone will be a winner,” said Dan Lougher, chief executive of Western Areas.
“We’ve met with quite a number of battery manufacturers, and they are quite specific on their requirements. Nickel is an important component of these batteries.”
Among those losing out would be lower-grade nickel mines like Cerro Matoso in Columbia, owned by South32 Ltd and Glencore’s Koniambo in New Caledonia, as well as Anglo American’s mines in Brazil producing ferronickel.
“The market dynamics will change in the coming years as a result of electric vehicles,” said Peter Bradford, chief executive of Independence Group Ltd, which is aiming to produce around 25,0000 tonnes of high-purity nickel this year from a new mine.
“Battery growth is going to disrupt the market,” he said.
The big companies are already moving.
Norilsk, the world’s biggest nickel miner, in June announced a tie-up with the German battery maker BASF.
Within a few weeks, BHP unveiled plans to retool its Nickel West division to start shipping nickel to battery manufacturers beginning in April 2019.
The announcement marked a turnaround for Nickel West, which two years ago was in its death throes, with its workforce of 2,000 told that their jobs would end in 2019.
Eduard Haegel, division chief of Nickel West, expects demand for electric vehicle batteries to account for about 90 percent of the division’s annual output of 100,000 tonnes within the next six years.
Meanwhile, Vale is looking for a partner in its loss-making New Caledonia nickel complex. It has been in talks with the Chinese battery maker GEM Co, the Financial Times reported.
“If we are not successful, we’ll have to face the reality, which is this operation is holding the company back,” Luciano Siani Pires, Vale’s chief financial officer, said, referring to the New Caledonian business.
Plants already shut may get a second chance, too.
Two with shots at restarting are Brazil’s Votorantim Metais, and First Quantum Minerals’s Ravensthorpe in Australia, which at today’s nickel prices cannot compete but could be profitable if the market continues to climb.
Benchmark prices on the London Metal Exchange have jumped 17 percent in the year to date to $11,725 per tonne, but remain well below the 2014 peak of more than $21,400, and over 75 percent off the all-time high of just over $51,000 in 2007.
In a sign of how much the electric car industry is changing the market, the London Metal Exchange this week said it may offer a nickel contract specifically targeting the battery market.
Manufacturing electric cars with high-driving ranges is fueling demand for nickel-rich batteries, according to Porsche . The German carmaker expects the ratio of nickel to cobalt and manganese in a typical battery to rise eight-fold as electric cars become more mainstream.
UBS estimates that 15 million electric vehicles will be on the road by 2025, lifting nickel demand by 300,000-900,000 tonnes, or by 10-40 percent of the current market.
(Reporting by James Regan and Melanie Burton. Additional reporting by Barbara Lewis in London and Nicole Mordant in Vancouver; Editing by Philip McClellan)
