Nickel pig iron producers eye up electric vehicle battery market

Lithium-Ion Battery for BMW i3. Credit: Wikimedia Commons

Producers of nickel pig iron (NPI) in Indonesia are looking at converting their material into an intermediate product that can be turned into nickel chemicals for the lucrative electric vehicle market.

Nickel is a key component of the lithium-ion rechargeable batteries used to power electric vehicles, sales of which are expected to soar over coming years as the world moves towards a low carbon future.

Specifically, electric vehicle batteries need nickel sulfate, prices of which have jumped around 40% since last April to above $18,000 a tonne.

“Given the spread between sulfate and NPI prices at the moment, about $4,000, it makes economic sense,” said Macquarie analyst Jim Lennon, adding that the NPI would be converted into matte, which can be refined into metal or battery grade nickel sulfate.

Worrying the market is how demand from manufacturers of electric vehicle batteries will be met in the longer term

“Nickel demand for batteries is accelerating much faster than we were assuming even a few months ago.”

Huayou Cobalt in a filing to the Shanghai Stock Exchange last year said it will produce matte from NPI. Other NPI producers in Indonesia are also exploring the idea.

NPI production costs in Indonesia are estimated at around $7,000 a tonne, which means conversion could cost up to $11,000, a fair distance from current sulfate and metal prices.

Nickel on the London Metal Exchange is up 60% to above $18,000 a tonne since March, mostly due to stainless steel mills accounting for 70% of consumption increasing production after the coronavirus lockdowns early last year.

Worrying the market is how demand from manufacturers of electric vehicle batteries will be met in the longer term.

“There’s a view that all the excess is NPI, which can’t be used for electrification, so we don’t care about it,” said Wood Mackenzie analyst Andrew Mitchell.

“But if NPI can be turned into matte to make metal and sulfate, it’s not a different market.”

In the shorter term, nickel inventories in LME registered warehouses will help to meet battery demand.

Total stocks stand at 248,664 tonnes , of which 80% are bagged briquette , easily crushed into small particles and dissolved in sulphuric acid to make nickel sulfate.

(By Pratima Desai and Tom Daly; Editing by Kirsten Donovan)


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