What does the post-pandemic era promise for this base metal? Can it make a comeback – and if yes, what factors can contribute to that possibility? Let us take a deeper look.
Nickel slump on the demand side
The primary reason for the slump in Nickel prices has been due to a global fall in demand – and not on the supply side. Over two-thirds of the nickel ore goes into the production of stainless steel, which has witnessed a major drop in demand this year. Why is stainless steel demand slowing down? Primarily due to the poor performance of the Chinese real estate and construction industry – along with the falling demand from the oil & natural gas industry. The worse news is that these demand sectors are unlikely to recover from the slump – even after the pandemic.
Nickel Surplus – A Silver Lining
Going by many metal industry experts, the prices of most base metals are likely to recover – once COVID-driven lockdown measures are lifted in most countries. As compared to the other base metals, nickel has been the best performing metal for the year 2019.
While April 2020 was a highly volatile month for this metal, the London Metal Exchange recorded the highest price of nickel – of $12,514 per ton – in over a month in April. This was primarily driven by market news about nickel mining companies, Nickel Asia and Global Ferronickel Holdings suspending some of their operations in response to the COVID-19 pandemic. Following that, the 3-month nickel price has fallen flat – at $11,870 per ton – following the drop in U.S. gas prices to below $0.
Following the suspension in nickel mining, the overall forecast for nickel in 2020 is projected to be in the surplus – of around 48,000 tons up from 11,000 tons. This is likely to be the first surplus year in nickel stocks since the year 2015.
Are batteries the future of nickel?
Since the 1980s, nickel has been a key component of Nickel Cadmium (NiCd) and Nickel-metal hydride (NiMH) batteries. The 1990s saw the introduction of NiMH batteries in electric vehicles (or EVs). The use of nickel also grew with the application of Lithium-ion batteries in camcorders, smartphones, and other portable devices.
Thanks to its higher energy and storage capacity and lower cost, the nickel-metal has been widely used in modern age batteries. With the global focus on renewable energy sources, nickel-powered batteries are being used in energy systems – thus making the production of clean energy (primarily solar and wind) a more viable option.
The other major demand for nickel in the coming decade would be from EVs – that are projected to make up 10% of all vehicles by the year 2025. EVs will boost the demand for lithium-ion batteries – and enhance the production of nickel-cobalt-aluminum (NCM) batteries that have nickel content of 90-95% (up from the current 33%).
The nickel metal is also an essential component for the cathodes used in many secondary or rechargeable batteries – including Lithium-ion, NiMH, and NiCd battery types.
Nickel production - Challenges
Even as the automobile industry is increasingly moving towards EV and hybrid vehicles, nickel miners and producers will have their share of challenges going ahead. While there is no supply shortage of nickel ore in the market, Lithium-ion batteries now are demanding for Class 1 nickel (used for producing high-quality nickel sulphate) – as against the cheaper Class 2 nickel that is easier to mine and is currently being used in stainless steel.
Additionally, with the restrictions imposed due to the ongoing pandemic, nickel mining projects in Indonesia have been severely delayed. Another challenge is the dwindling stock of nickel ore in China – forcing its producers to meet its shortage by switching to Class 1 nickel.
Despite the short-term challenges, the industry demand for high-quality nickel is projected to stay strong – particularly from the automobile sector. Given the constant change in battery chemistry, nickel producers will find it challenging to keep up with a strong growth projection.
Overall, industry experts project that the market for nickel-powered Lithium-ion batteries will continue to be positive and expand with the mainstream adoption of electric vehicles and renewable energy sources.