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Nickel market turmoil spurring EV price hike, switch in battery chemistry: panel


Movement away from NMC battery seen

Nickel carbon footprint key

Lithium deficit could lead to potential demand destruction

  • Author
  • Diana Kinch
  • Editor
  • Adithya Ram
  • Commodity
  • Electric Power Energy Transition Metals

Recent turmoil in the nickel market has been complicated for electric vehicle car manufacturers, spurring EV price rises and encouraging market growth for LFP (lithium iron phosphate) batteries which don't contain nickel, participants at the FT Commodities Global Summit said March 22.

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There will be "a significant increase in demand" for cell chemistries that do not contain nickel, said Orral Nadjari, CEO of UK battery-maker start-up Britishvolt. It's possible to foresee a 50:50 mix in battery types between LFP and NMC (lithium nickel manganese cobalt oxide) battery types in Europe by 2030 due to regulatory frameworks being imposed, he said.

"The geopolitical situation means we need to reinvent the supply chain," Nadjari said. "We don't have the supply chain for LFP today in Europe and Europe is struggling with supply chains for NMC at the moment. We're seeing a 25%-35% shift from NMC going forward to LFP chemistry in batteries," he estimated.

More manganese could be added to LFP batteries in order to address market requirements, Nadjari said.

Nickel, which registered a global deficit in 2021, started to experience a price surge after Russia invaded Ukraine Feb. 24. This spiraled into a 250% gain within three days on the London Metal Exchange to reach more than $100,000/mt before the LME intervened March 8 to stop trading, reopening days later in a market subject to price limits. The rapid price spike was attributed to investor speculation.

The nickel market has doubled in size since 2015, with an extra 1 million mt/year out of a 3 million mt/year market coming onto the market from Indonesia, but with this being a type of nickel that cannot be traded on exchanges, said Socrates Economou, head of nickel and cobalt trading, Trafigura. Only 25% of available nickel is traded on the LME, compared to 70% in the case of copper and 60% in aluminum, in terms of registered production, he said, indicating that this could lead to exchange prices being out of step with part of the market.

If the nickel price was to stay at $50,000/mt this would result in a 5% increase in EV prices, manufacturers have already been raising EV prices to reflect recent increases in nickel, lithium, copper and aluminum prices, according to the trader.

"Prices for EVs are starting to increase, margins for EVs are very thin and there will be disruption on the targets that everyone estimates for EVs," he said.

Lithium deficit

While the battery market is seeking to diversify from nickel, and from China's control over processing of battery materials, the current lithium deficit is nonetheless the "biggest issue in terms of potential demand destruction" facing the sector, Socrates said. "There is an estimated market deficit of 100,000 mt lithium equivalent in a market of 500,000 mt," he said.

Lithium prices have been on a steady upwards trajectory since early 2021 on the back of rapidly increasing demand from the EV batteries sector, with the increases accelerating to more than double since early January this year.

Platts assessed lithium carbonate unchanged at $72,000/mt March 22, while lithium hydroxide rose $100/mt to $73,600/mt, according to S&P Global Commodity Insights.

High EV carbon footprint

Carbon, with prices recovering after a slump when the war erupted, is also an increasingly important factor for EV makers anxious to produce products with a low carbon footprint.

"Production of EVs is much more carbon-intensive than production of ICE vehicles, while life-time emissions are at par," said Socrates. Nickel may represent 55% of battery material for EVs while cobalt now represents only 5% as there has been a move away from cobalt use in recent years. Cobalt typically has a lower carbon footprint than nickel as most cobalt is produced in the Democratic Republic of Congo, which mainly uses hydro power.

Nickel from Indonesia has a carbon footprint of 60 mt per ton of nickel, compared to 4.4 mt on nickel from Vale's Sudbury mines -- mainly hydro-powered -- and a market average of 20 mt, he said.

It will be interesting to see what price producers will be willing to pay for carbon offsets to reduce this footprint to zero emissions, Economou said.

An independent recycling source heard by S&P Global said that EVs currently have twice the carbon footprint of the typical ICE vehicle because of the heavy carbon footprint of some battery material mining. However, it is estimated that up to 90% of this mining footprint could be taken out via greater use of recycled materials in coming years.

"The carbon footprint of an EV could therefore equate with that of an ICE vehicle in seven years' time, when recycled battery materials become more available," the source said.

For the time being, costs are problematic, with battery materials costs for carmakers having risen 40%-50% so far this year and making the energy transition, according to the source.

Britishvolt's Orral agreed there is still considerable embedded carbon content in EVs.

A shift towards more regional supply chains in battery metals for the car industry was already apparent before the Russia-Ukraine crisis, and could significantly reduce carbon footprint, said Vale's Deshnee Naidoo, Executive Vice President of Base Metals.

OEMs and the rest of the value chain need to gravitate to where the lowest carbon footprint is, she said.