Despite the semiconductor chip shortage holding back new car sales, electric vehicles were prioritized last year, stimulating demand growth for nickel, UBS analysts said in a research note. EV sales in core markets, such as China, Europe and US saw a rise of around 130% on the year to over 3 million units in 2021.
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The Swiss multinational investment bank said it had recently upgraded its EV forecasts for China and expects global EV sales to increase by 60% year on year to around 4 million units in 2022.
"Batteries accounted for about 10% of nickel demand in 2021 but the sustained rate of rapid demand growth means EVs are already delivering transformational nickel demand growth," UBS metals and mining analysts led by Daniel Major said in a research note.
"EV/renewables account for about 6% of copper demand but its rate of growth is expected to be less than half of nickel due to the high base from renewables in 2021," the analysts said.
The stainless steel sector accounts for around 70% of all global nickel demand. Alloys take up around 20% and its demand likely to take the longest to return to pre-pandemic levels, HSBC said.
The metal is also set to play a pivotal role in energy transition due to the growing market for nickel-cobalt-aluminum batteries used in electric vehicles, which accounts for around 10% of all nickel demand.
Although EV sales have accelerated, especially in Europe and China, they make up between 6%-9% of the total car market, said ED&F Man Capital Markets Analyst Edward Meir.
In the global EV market, China leads the way with 3.2 million units sold in 2021, equivalent to 14% of total Chinese car sales. Sales in the US sales doubled last year to just under 660,000 units, equivalent to 4.4% of the US passenger market, Meir said.
In Germany, plug-ins constituted about a quarter of all sales in 2021, while France and the UK had penetration rates of around 20%. Norway was at the top with a rate of 86%, the analyst said.
"Outside of these countries, EV's account for just 1% of sales and so penetration will take much longer to pan out, as will achieving COP 26 climate goals," Meir said.
"For now, automakers have little choice but to fall in line with government mandates to transition their vehicle fleets to EV's," the analyst said.
US EV roll out
In the US, 22 models, consisting mostly of SUV's and trucks, are expected to be rolled out in 2022, while another 27 are anticipated to come out next year, Meir said.
US EV sales were up 88% year on year in 2021 but they still have yet to take off among the broader public. "We have a lot of electric vehicle conversations", one auto dealer was quoted as saying. "But it hasn't translated into consumers coming in saying 'I got to have one", ED&F's analyst said.
"This is exactly the issue going forward, namely, what happens if these deadlines roll around and car compa­nies find that there is less-than-forecast EV uptake for whatever reason (i.e., sticker shock, no more subsidies, range anxiety, high power prices, expensive batteries or gasoline cars still being used well past their "use-by" date)," Meir said.
Should such a situation materialize, Meir believes governments could extend deadlines for a com­plete transition, "just as they arbitrarily imposed them, leaving the car industry somewhat in the lurch."
According to HSBC metals and mining analysts led by Jonathan Brandt, nickel demand in 2021 from batteries came to around 11% of overall demand.
"It remains a dominant growth driver and is expected to account for 23% of demand by 2026 [as per estimates]," HSBC said.
HSBC's EV team said it had increased its forecasts of EV penetration, which includes battery electric vehicles plug-in hybrid electric vehicles, from 17% to an estimated 25% in 2025.
"We estimate nickel demand from batteries to grow to approximately 855,000 mt in 2026 from about 296,000 mt in 2021. However, Lithium ferrous (iron) phosphate (LFP) cathode chemistry has been gaining favor relative to nickel-based cathodes since early 2021," HSBC said.
HSBC's average 2022 LME nickel price forecast stands at an estimated $19,493/mt, while UBS forecasts $21,477/mt. ANZ puts the levels between $21,000-$21,500/mt, ED&F Man Capital Markets estimates $21,950/mt and Commerzbank sees nickel prices reaching $22,000/mt by the end of 2022.
The London Metal Exchange three-months spot nickel price was trading at $23,035/mt as of 1:17 pm GMT Jan. 20.