Elon Musk, chief executive officer of electric vehicle (EV) producer Tesla, publicly called for a ramp-up in global nickel mining in line with the company’s production boost during a presentation on the company’s second-quarter results on Wednesday July 22.
The EV industry expects wider adoption of the nickel-cobalt-manganese (NCM) 8-1-1 battery while the sector matures, meaning increased demand for class 1 nickel units.
And though the battery market currently accounts for only 3% of global nickel demand, participants are bullish for forward demand from EV speculators, expecting EV demand to hit double-digit penetration as soon as 2025.
Global nickel consumption for preferential battery-grade nickel sulfate in battery precursor production increased by 28% year on year in 2019, to 162,000 tonnes.
Nickel sulfate demand accounted for 6.77% of the International Nickel Study Group's estimated 2.39 million tonnes of global demand in 2019 - a small but growing proportion of the market.
But investment in many suitable high pressure acid leaching (HPAL) projects, which could produce suitable nickel units, have been hampered by a suppressed London Metal Exchange three-month nickel price.
Market participants deem $22,000 per tonne to be an investment sweet spot for HPAL initiatives, but the LME three-month nickel price largely continues to languish at significantly lower levels, most recently trading around $13,480 per tonne on July 23.
Musk acknowledged the LME nickel futures price as an impediment to nickel mining efforts, but urged miners not to be deterred on that basis.
“Don’t wait for nickel to go back to some high point you experienced five years ago,” Musk said of the price.
Musk may well be alluding to the May 2014 $19,280 per tonne high for the LME three-month nickel price, a far cry from today’s price levels.
“Tesla will give you a giant contract for a long period of time if you mine nickel efficiently and in an environmentally sensitive way,” he added.
Although battery raw materials prices continue to trade at low levels, nickel sulfate prices in China, where EV demand remains most concentrated, have been boosted by a slight uptick in EV demand of late.
China produced 84,000 new energy vehicles (NEVs) in May 2020, including pure electric vehicles (PEVs) and plug-in hybrids - a 5% increase from April, but down by 25.8% year on year, data from the China Association of Automobile Manufacturers (CAAM) said.
Fastmarkets assessed the nickel sulfate min 21%, max 22.5%; cobalt 10ppm max, exw China price at 23,000-23,200 yuan ($3,288-3,316) per tonne on July 17, up from 22,500-22,700 yuan per tonne at the start of the month, but compared with a 2019-high of 32,000-32,500 yuan on September 13.