Nickel metal still has key role to play in 2023 battery grade market: 2023 preview

With global lithium-ion battery production forecast to grow significantly in the coming years, market participants in the global nickel industry are working on the most efficient way to produce nickel sulfate for lithium-ion battery cathodes

In addition, nickel sulfate is a key component in nickel-manganese-cobalt (NMC) units, and nickel-rich batteries are often preferred over lithium-ion batteries due to their high energy density and longer range when used in electric vehicles (EVs).

Demand for nickel from the battery industry is, therefore, set to increase significantly. Fastmarkets researchers forecast that demand for nickel for use in EV batteries represents around 280,000 tonnes per year of nickel metal globally, which corresponds to around 10% of worldwide demand for nickel.

But this figure is set to grow significantly. Demand from the battery industry is expected to increase to close to 314,000 tonnes in 2023 and to 668,000 tonnes by 2025.

The past year has been seismic for the nickel market, with the London Metal Exchange nickel price, the global benchmark for the industry, experiencing significant disruption, and a rise in production and availability of intermediary products.

The nickel price on the LME was extremely volatile and reached record highs this year. After resuming trading in late March, it has traded in persistently low volumes, which has often resulted in high volatility. Prices spiked above $30,000 per tonne in November on seemingly few market drivers.

This has resulted in several drastic shifts within the global nickel market, including a move away from the use of nickel metal in the production of sulfate in China, where producers are opting to use intermediate products such as nickel matte and nickel mixed hydroxide precipitate (MHP).

And recently, nickel sulfate producers have been pondering how to ensure they meet the growth in demand while producing reliable, cost-effective battery-grade material.

The preferred way of producing nickel sulfate has been to dissolve nickel metal, particularly nickel powder or briquette, in sulfuric acid.

“With the growing availability of [intermediate] nickel products, it no longer makes sense to focus on nickel metal,” one sulfate producer told Fastmarkets.

The cost-effective nature of producing nickel sulfate from intermediate products such as MHP is clear. Products such as MHP are traditionally priced as a percentage of the LME price and can fluctuate depending on the trading level of the LME nickel official cash price and market dynamics.

Fastmarkets’ assessment for the nickel mixed hydroxide precipitate payable indicator, % London Metal Exchange, cif China, Japan, and Korea was 70-74% on December 16.

By comparison, nickel metal products, such as briquette, are priced at a premium to the LME nickel price, with the premium varying significantly among geographic regions.

For instance, Fastmarkets assessed the nickel min 99.8% briquette premium, cif Shanghai at $100-150 per tonne on November 29.

Whereas in Europe, the nickel briquette premium, in-whs Rotterdam was $500-850 per tonne on December 13.

The conversion costs for producing sulfate for MHP are significantly higher for producing sulfate from MHP compared to dissolving nickel metal. Fastmarkets estimates the cost for dissolving briquettes at around $700 per tonne, whereas the processing costs for MHP are closer to $2,500 per tonne.

Despite these higher conversion costs, the lower outright cost for MHP means that the overall cost of production remains lower for sulfate producers using this route.

Hedging remains a concern

Despite the cost-effectiveness of intermediate products such as MHP or nickel matte and the growing shift toward these routes in China, many producers outside China still see briquette as an important part of the production process due to the hedging opportunities they provide.

“Many of my customers [in Taiwan, Japan and Korea] still prefer briquettes, as they provide them with greater security if the market shifts,” one nickel distributor told Fastmarkets.

As an intermediate nickel product, MHP is classified as “class-two” nickel and is therefore not LME deliverable because it falls outside of LME specifications. Therefore, it provides limited hedging opportunities for participants looking to guard against risk on their production or consumption.

Briquette is LME deliverable, giving market participants access to futures contracts and to the so-called “market of last resort” — in the form of the LME warehouse system — should they need to source last-minute materials or offload stockpiles due to a downturn in the market.

In fact, briquette is the dominant material in the global nickel market — it accounts for 85% of worldwide LME warehouse nickel stocks.

“We have to remain connected to the LME price,” one battery producer said, due to its position as the global benchmark for the industry.

“While everything is still priced off the LME, you have to make sure you have access,” the producer added.

To keep track of all the latest developments in the nickel market, head to our dedicated nickel market page.

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