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General Market Commentary
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General Base Metals
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General Energy
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General Market Commentary
Why electric vehicles could fracture the nickel market
China’s Ministry of Finance made some minor but significant tweaks to its nickel import tariffs at the start of this year.
The import duty on melting-grade nickel cathode was doubled from 1 percent to 2 percent, while that on nickel sulfate was cut from 5.5 percent to 2 percent.
Why the differentiation?
The reason is that nickel sulfate is a form of the metal highly suited to the production of precursor battery materials.
China, already a leader in the electric vehicle (EV) battery sector, is evidently laying the ground for stimulating imports of nickel in the most readily usable composition for lithium-ion battery processing.
Batteries are still a relatively small part of nickel’s usage profile, representing about 4 percent of global demand, according to the International Nickel Study Group.
But everyone knows that ratio is only going to increase as the electric vehicle revolution builds momentum.
As it does, however, it could fragment an already cracked market, both in terms of the supply chain and pricing.
HOW DO YOU TAKE YOUR NICKEL?
Most of the world’s nickel production — about 70 percent of it — is used as an alloying input in the production of stainless steel.
The type of nickel used for stainless production was historically, in ascending order of price, stainless steel scrap, ferronickel and refined metal.
But the Chinese initiated a materials revolution around the middle of the past decade in response to nickel’s extraordinary bull run to more than $50,000 a ton in 2007.
Looking for cheaper alternatives, they unearthed a technology that had been explored but never developed, namely nickel pig iron (NPI).
An explosion in this form of the metal has generated far-reaching consequences, including a whole new nickel ore supply stream from Indonesia and the Philippines, the offshoring of NPI production and even stainless steel production to Indonesia and the crash in the nickel price to less than $10,000 in 2016.
Producers of more conventional types of nickel are still struggling to adjust. Witness the decision late last year by Vale, the world’s largest producer, to mothball production capacity.
THE WRONG SORT OF NICKEL
Nickel’s existing dynamics, beholden as they are to the needs of stainless steel producers, are highly problematic for the EV sector.