Electra Battery Materials looks to provide sustainable nickel sulfate to North American battery value chain

Electra Battery Metals is looking to provide sustainable nickel sulfate from Canada to the North American battery value chain, which has become increasingly important as battery makers and automakers look for alternative and domestic sources of the metal.

Electra is conducting a $1 million study in partnership with the Government of Ontario, Glencore, and Talon Metals to determine the feasibility of building nickel sulfate and battery precursor cathode-active materials plants adjacent to its cobalt sulfate and recycling operations in Ontario, Canada.

"Our hope is that [the nickel sulfate plant] will act like a catalyst for nickel mining projects in North America to build quicker," Electra Vice President of Commercial Operations Michael Insulan told S&P Global Commodity Insights in an interview.

It would offer an immediate market for the material in Canada, which was a direct route to batteries, as well as offer miners reduced project capital expenditure by not having to build their own processing capacity onsite, but rather send an intermediate product to Electra, Insulan said.

"If we don't build this in Canada, they don't have much choice if they want to go straight into the battery industry other than to ship it to China or Asia, so we see ourselves as a catalyst to accelerate the North American nickel mining industry," he said.

"One of the booms for Electra and non-China or Indonesia nickel plays is that auto companies and battery cell makers will look for alternative nickel sources," he said.

As with most battery metals, most nickel sulfate plants are situated in Asia although there is a push to develop domestic capacities in Western countries to lower carbon footprints.

"Our project pipeline suggests we are working towards building this for commissioning in 2025 and the idea here is to use local raw materials, not imported from Indonesia or anything like that," Insulan said.

The carbon footprint of Canadian nickel sulfate production would be up to seven times lower than for the conversion of Indonesian nickel deposits, according to Electra estimates. Insulan added that besides environmental concerns, Indonesia was also becoming increasingly raw material resource nationalistic.

North America has a number of nickel sulfide deposits, which would feed the potential refinery and meet the region's long-term requirements, he said.

There was also ample demand from OEMs, which Electra expected to fast-track North American nickel supply, pushing down long-term raw material costs through economies of scale.

Record-high nickel prices

Nickel has been in focus in recent weeks, with the London Metals Exchange suspending trading at 0815 GMT March 8 after the LME three-month spot nickel price reached an all-time high of $101,365/mt during early trading on the day after closing at $48,078/mt March 7.

It had dropped back to $80,000/mt when the suspension took effect, but the March 8 trades were cancelled and a 5% daily limit imposed on trading when it resumed March 16.

The daily limit was increased to 8% March 17 and 12% March 18, with prices moving to the lower limit almost immediately after trading opened on both days.

The LME three-month price was last at $36,915/mt early March 18.

"At $100,000/mt -- the levels reported before trading halted -- the average North American EV would contain more than $2,000 worth of nickel in batteries," Insulan said.

He explained that the average battery pack size of full-electric and plug-in hybrid vehicles sold in North America was around 59 kWh in 2021. With an estimated 35,000 mt of nickel spread across 730,000 units -- approximately 20 kg per vehicle -- the average value of nickel contained in lithium-ion batteries per vehicle in North America was $620 when nickel was trading at nearly $30,000/mt.

"This obviously has an impact on vehicle cost of production, but the bigger problem to automakers is that it is a cost which is mostly outside their realm of influence," he said, adding that it was unclear how automakers could solve this.

One option would be a potential vehicle price surcharge based on underlying battery commodity prices, which would let the consumer pay the price, although this raised questions about continuity of demand.

Alternative battery chemistries and accelerated recycling were two other ways to combat high nickel prices, he said, adding that, "ultimately, the fact is that all battery commodity markets are cyclical and sometimes volatile. Automakers and consumers will adapt."

Russian supply

Nickel supply out of Russia is also a question mark currently and if sanctions were placed on Russian supply, it would definitely have an impact on EV makers and the nickel price, Insulan said.

"Even if this war ends soon, you wouldn't sensibly engage in long-term contracts... the Russian jurisdiction won't attract foreign investment and the trajectory from now on will likely be to unwind from any physical contracts you have with Russia," Insulan said.

"Even if they could re-initiate business after all this is done, you would probably think twice about it... if you're an OEM, you're going to be reluctant doing deals in Russia going forward," he added.

It was uncertain how Russian supply would be replaced, Insulan said, saying that it would likely be a combination of things.

"Chinese output will increase, there will also be an accelerated effort to convert nickel cathode to sulfate, which is not commonly done... and then there will probably be a number of accelerated programs.

"So I say 2025 [for the nickel sulfate plant], but the fact is that we may accelerate it depending on the outcome of this study," he said.

The study is expected to take around three months and then the biggest hurdle would be permits, but thereafter Electra could be in a position to initiate earlier than planned, Insulan said.