Mass production of electric vehicles (EVs) will transform the nickel market, which must evolve from pricing and supply perspectives in order to meet the anticipated surge in demand, a Vale executive said ahead of Metal Bulletin's 6th International Nickel Conference, which begins Thursday May 31 in Toronto, Canada.
Nickel prices are not nearly high enough to incentivize more production to come online. “If we want to supply this battery revolution with the appropriate nickel units, prices will have to be substantially higher,” he said, adding that it would likely take a couple of years for that to occur.
Morris didn’t have a specific nickel price point in mind for warranting additional production but it would “certainly” need to be above $17,000 per tonne, he said.
The London Metal Exchange’s three-month nickel contract closed the official session at $14,355 per tonne ($6.51 per lb) on Monday May 14. The contract had hit a more than three-year high of $15,790 per tonne on April 19.
Demand for nickel in the EV space is expected to total 36,000 tonnes in 2018, according to Frank Nikolic, Vale's manager of market intelligence for base metals.
That figure is expected to surge to 350,000-500,000 tonnes by 2025, according to Morris.
Nickel demand currently stands at slightly more than 2 million tonnes and is roughly split evenly between Class 1 and Class 2 units, meaning that nickel demand in the EV space will account for 35-50% of current Class 1 nickel usage, he added.
But until prices and demand warrant a shift, the majority of Vale’s Class 1 nickel units will continue to feed demand in aerospace and plating, Morris said.
Once the EV market is ripe for additional nickel supply, Vale is ready to compete in the space. “We believe that our readiness, our capabilities and our optionality are very good,” he said. The “vast majority” of Vale’s nickel assets are Class 1, but the Class 2 assets that the company has – its refinery in Japan and its mine in New Caledonia – “are readily available to be converted to Class 1 without significant capital or other technicalities.”
As for any threat to overall EV market growth, Morris said he isn’t worried. “That train has left the station. It’s not coming back. Not a matter of if but when and how fast.”
Morris acknowledged that while there are “concerns in a number of areas that may alter the growth [of EVs], we don’t believe there’s anything that will derail EVs from being the dominant form of transportation in the future.”
Potential obstacles include required infrastructure, getting EVs to be at cost parity with internal combustion engine vehicles and continued incentives from governments and other entities to boost EV ownership.
Vale also isn’t overly concerned about potential nickel substitution, largely because “there’s no alternative technology that will come in and save the day. It’s just not there. Other batteries are years away from being commercialized,” Morris said.
Further, companies have been “spending billions” to produce lithium-ion batteries that contain nickel, he said. “By 2025, there will be massive economies of scale producing this particular chemistry. Those will make for very high barriers of entry for alternative chemistries.”
If anything, the amount of nickel used in EV batteries will increase. Most EV battery chemistries will be eight parts nickel, one part cobalt and one part manganese by 2025, Morris said. Battery chemistries currently use less nickel.
Nickel is attractive because it allows for a higher energy density, and the more nickel that is used means there will be less cobalt, which is much more expensive.
Although technically difficult and complicated to increase the amount of nickel used in EV batteries, “everyone is moving toward that ... cheaper and higher performance,” Morris said.
Vale’s Morris will be a panelist at Metal Bulletin's 6th International Nickel Conference, running from May 31-June 1 in Toronto. He will be joined by Barry Jackson, principal market analyst of nickel at Anglo American; Delphine Le Liboux, sales manager of the nickel division at Eramet; Mark Selby, president and chief executive officer of Royal Nickel Corp; and Denis Sharypin, head of market intelligence at Norilsk Nickel.