Could EV demand cause a shortage of battery-grade nickel?

 

Nickel: The dark horse in the EV battery race
Without a doubt, the barn door that has been cracked open on electric vehicles (EVs) is only going to swing further. One recent projection puts EVs at 16% market penetration by 2030 and 51% by 2040. Several countries including China, France and the UK have signalled they will eventually ban gas-powered vehicles, and one automaker, Volvo, recently announced that starting in 2019, all models will be hybrids or electrics.

This has investors flocking to companies that mine lithium and cobalt – two key ingredients of batteries used in EVs. But it’s a lesser-known fact that nickel, a cheaper, up-to-now industrial metal used primarily in stainless steel, will also be needed for EV batteries. In fact, so much nickel could be demanded in the next few years that analysts are predicting a shortage of battery-grade nickel. Investors who can identify companies with properties that contain this type of nickel stand to make a bundle, especially those in the early exploration stages.

Why is nickel important?
Because more nickel in the battery solves the two major impediments to mass adoption of EVs, which are range and cost. Nickel cathodes (the part through which electrons enter the battery) intrinsically have a higher energy density. The more nickel content, the longer distance you can travel and it also brings down costs. Right now the demand (a large part of it being speculation) for cobalt and lithium has spiked the prices of these two metals considerably, which ironically has made EV batteries more expensive to produce and therefore dampens EV market growth. Since 2008 the price of lithium carbonate has doubled from around $4,500 a tonne to $9,000, while cobalt has tripled from $20,000 a tonne to $60,000 just in the last year.

Michael Fetcenko of BASF Battery Materials said during the Benchmark Minerals Cathode Conference: “You can get higher energy in two ways: you can take your existing cathode material and you can widen the operating voltage, or you can use higher nickel content.”

Rising demand for battery-grade nickel
The increased input costs of lithium and cobalt has battery and electric car manufacturers wanting to shift their current mix of materials to using less cobalt or lithium and more nickel, which is currently just under $12,000 a tonne.

According to a recent report from UBS, if 15 million EVs are produced in 2025, it would mean an additional 300,000 to 900,000 tonnes per annum of incremental demand. Ie. that much new demand each year until 2025.

However, it is important to note that the 300 to 900 ktpa figure depends on the chemistry of EV batteries changing from the current 1:1:1 ratio of nickel-manganese-cobalt (NMC) batteries used for example in the Chevy Bolt, to 8:1:1 (eight times more nickel). UBS says the drivers for nickel are cobalt’s expected price surge, and the security of cobalt supply (65% of cobalt comes from the DRC, an unstable mining jurisdiction).

Another report from Wood Mackenzie confirms the UBS findings. Except the consultancy is more conservative than UBS, predicting that nickel uptake in all batteries including EVs “will be considerable, typically exceeding 200 kt by 2025.” Wood Mackenzie also confirms that NMC batteries will be a key driver of battery-grade nickel:

“The current consensus is that NCM is likely to be the dominant battery type over the next ten years, signalling that a substantial boost to nickel demand is possible.”

To envision what would happen to battery metals demand should the world suddenly switch from gas-powered vehicles to EVs, UBS extrapolated data for a fictitious scenario where 100% of the world’s automobile demand came from Chevy Bolts instead of the current auto mix.

Nickel demand would more than double, by 105%, lithium would take off by 2,898%, the need for cobalt would rise by 1,928%, rare earths demand would spike by 655%, and graphite by 524%, to name just the top five metals. The only metals that would drop are platinum and palladium, used in catalytic converters of gas- and diesel-powered engines; demand for PGMs would fall by 53%.

In this scenario, even more nickel would be demanded for Teslas, whose nickel-cobalt-aluminum (NCA) cathodes made by Panasonic are 80% nickel, versus the Bolt’s NMC batteries which use equal parts nickel, manganese and cobalt.

According to Elon Musk, Tesla's batteries should be called “nickel-graphite” because the cathode is nickel and the anode is made of graphite and silicone oxide. In fact, nickel is the most important metal by mass for lithium-ion batteries (see infographic below).