Nickel continues to trade higher, EV conversation grows louder: LME Week

The London Metal Exchange nickel price continued to trade higher Oct. 21, as the market debated how much impact the growing electric vehicle market will have on demand for high grade nickel metal.

As the annual LME Week continued, albeit virtually this year, there was a lot of attention on nickel. The net result has been firm upside support for the metal, trading around $16,000/mt during intraday trade Oct. 21.

That put the LME price at year-to-date highs.

During the Bank of Montreal's LME Week seminar Oct. 20, its managing director of commodities research, Colin Hamilton, said that, without a doubt, EVs were "back in vogue".

Hamilton, like many others on panels during the course of the week, said the EV story was gaining solid momentum as penetration rates pick up globally, albeit from a low base.

Hamilton said Europe will be almost as big as China in terms of market share by the end of 2020 and, at the same time, more nickel intensive battery cell chemistries were coming through.

The share of electric cars in European auto sales is set to triple to 10% in 2020 as automakers race to meet increased CO2 targets and avoid hefty fines, and rise further to 15% in 2021, consultancy Transport & Environment said recently.

Julia Poliscanova, senior director for clean vehicles at T&E, said: "EV sales are booming thanks to EU emissions standards. Next year, one in every seven cars sold in Europe will be a plug-in. EU manufacturers are back in the EV race, but without more ambitious CO2 targets in 2025 and 2030 to spur them on, they will run out of steam as soon as 2022."

There were questions as to whether the EV story was a little premature for the nickel price, with one delegate saying it was "baked into" the price, while a broker said he had not ruled out the price heading to $18,000-$20,000/mt over the next year.

Strong case for nickel

Speaking to S&P Global Platts during a Q&A session Geordie Wilkes, head of research at brokerage Sucden Financial, said that the nickel price was a mixture of market excitement and fundamentals. The outlook for the metal was constructive, he said.

Wilkes did caution that although the EV story will be a major boon for nickel, there could be potential headwinds in the term of traditional stainless steel demand. Nickel is a key ingredient in the stainless steel manufacturing process.

"All things said, there is a strong case for nickel," Wilkes said.

Brokerage StoneX said it expected nickel demand to be 16% lower in 2020 than before COVID-19. Demand was expected to remain robust over the next decade, with nickel demand in lithium-ion batteries due to jump sharply.

Natalie Scott-Gray, StoneX senior metals analyst, base metals, EMEA & Asia, said that, of the metals used in the lithium ion battery cathode, nickel was expected to undergo the greatest demand across the LIB sector due to its responsibility for energy density.

"The end-use consumption of nickel market is going to drastically change over the next decade with its use in LIB moving from 6% in 2020 up to 35% by 2030," Scott-Gray said.

She said key drivers would come from increased penetration of electric transport in the market, as well as the requirement of increasing the driving range of these batteries by upping the percentage of nickel used in a single cell, which was being seen in the changing configuration of lithium nickel manganese cobalt oxide batteries, which had moved from a split of 111 to 532 to the latest 811.

Meanwhile on Oct. 19, ED&F Man consultant Edward Meir said near-term caution was needed for the price impact of electric vehicles on nickel and other metals.

During his presentation, Meir said EVs needed to be able to "stand on their own feet" without the need for government subsidies before the market could become too excited about the prospect of mass adoption.

Like many other things, EVs needed to be cheaper to appeal to consumers and also offer an "even greener" footprint to live up to the hype, Meir said.

EV sales could overtake those of internal combustion engine vehicles over 2030-2035, he said.