Global Mining Symposium: Demand for Nickel in EV Batteries Could Cause Supply Shortage Over Next Two Years, Says Ken Hoffman of McKinsey
The growing electric vehicle market is expected to see increased pressure for nickel, a critical component of nickel-manganese-cobalt (NMC) batteries used in electric vehicles, Ken Hoffman, senior expert at McKinsey’s Basic Materials Institute, told the Northern Miner’s Global. Mining symposium in May.
In an interview with Frik Els, editor-in-chief of MINING.com, Hoffman said sales of electric vehicles reached more than 3 million units last year, up from around 22,000 a decade ago.
“If there was not a shortage of [micro]chips in 2021, you would probably envision six to seven million EVs sold by the end of this year, ”he said.
Last year, EV batteries consumed around 200,000 tonnes of nickel, with over 300,000 tonnes expected this year. “Currently, around 20% to 25% of the world’s nickel production is destined for electric vehicles as Class 1 products.”
With a nickel content of over 99.8%, Class 1 products provide the purity required for NMC batteries. Class 2 products, which contain less than 99.8% nickel, are used to make stainless steel and alloys.
In March, Tsingshan Holding Group, the world’s largest producer of stainless steel, announced plans to produce nickel sulfate from cast nickel for use in EV batteries.
The announcement pushed the London Metal Exchange’s three-month nickel price down from a seven-year high of US $ 20,110 per tonne on February 22 to US $ 15,948 per tonne on March 30, S&P reported Global Market Intelligence.
Since then, the price of nickel has fallen to around US $ 8,000 per tonne, Els said.
“This is the brilliance of Tsingshan,” Hoffman said. “They recognized years ago that there were considerable amounts of nickel in Indonesia, but it contained large amounts of iron. So Tsingshan smelted the nickel ore to produce a 6% to 12% nickel concentrate, which they used to make stainless steel. “
At that time, he explained, the world was in short supply of nickel and prices were around US $ 50,000 per tonne. Tsingshan’s method of mass production, he said, has lowered nickel prices to around US $ 8,000 a tonne, with “a lot of people in the industry being burned by it.”
According to Hoffman, the process Tsingshan plans to use is not new and dates from the mid-1970s. “It hasn’t worked out very well. It’s not cheap either. Another issue is the purity of the product. “
Contracts for nickel products are often required to specify impurities up to parts per billion, he noted. In particular, the presence of iron in the product can adversely affect the performance of the EV battery.
However, Hoffman said he hoped Tsingshan’s plans would work, because every $ 1,000 increase in the price of nickel adds about US 80 ¢ per kilowatt hour (kWh) to the cost of an electric vehicle.
“If the prices went up from US $ 10,000 to US $ 15,000 per tonne, you envision an increase of about 20-30% in the cost of the battery,” he explained.
Hoffman’s biggest fear for the EV battery market is that nickel prices will go so high that battery makers will look for substitutes and switch to other materials. Then the nickel market “will do what it has always done, which is to go through a huge boom followed by a big collapse”.
Automakers are hoping nickel prices will settle in the US $ 20,000 per tonne range, the number that mining executives will start to “believe the nickel market is real and start investing in new mines.” . “
The current bottleneck on EV production is limiting demand for nickel, Hoffman said. Once this bottleneck is eased, there will be increased pressure on nickel supply chains, which could lead to shortages over the next two years.
He noted that China and other countries like the United Arab Emirates are investing heavily in Indonesia to ensure reliable supplies of nickel. The problem for the West, however, is that there is a lack of foundries outside of Indonesia. “Finding mines is much easier than having to invest the US $ 1 billion to $ 2 billion needed to build a smelter,” Hoffman said.
Hoffman believes that the European Union and the United States should invest the billions they have pledged for the electric vehicle industry in building smelters and refineries.
“We always tell mining executives to lock themselves into contracts with OEMs [original equipment manufacturers] because they will tell you what products they will need in the future, not what they need today, ”he added.
He noted, for example, that Tesla and Volkswagen are looking to source nickel powder, but current global production is only 30,000 to 40,000 tonnes per year. “If suddenly you need 500,000 tonnes of nickel powder, where is it going to come from, who is going to make it and where is it going to be refined?”
While nickel is great for making batteries, OEMs are exploring a basket of other metal-based battery chemistries, Hoffman said, including lithium-ion manganese oxide (LMO) and lithium-iron. -phosphate (LFP).
“The manganese market is about ten times the size of the nickel market, with the metal being widely distributed around the world, and has led to a resurgence of LMO batteries,” he said.
Els noted that LFP batteries currently account for around 15% of the total global market share.
LFP technology has been around for over 40 years, Hoffman said. “However, batteries that use LFP chemistry only generate around 170 watts of power per kilogram of battery weight, which is no different than they were 10 to 15 years ago.”
The best high-nickel batteries, he said, operate at nearly double that – at around 300 watts per kilogram of battery weight.
“So why are we talking so much about LFP batteries?” Hoffman asked. “Partly it’s a matter of options: if around 3 to 4 million electric vehicles consume 200,000 tonnes of nickel, what happens when we come to a world with 80 to 100 million electric vehicles, world demand for class 1 nickel will exceed 4 million tonnes, leading to the very rapid depletion of nickel stocks. “
LFP chemistry offers automakers alternative battery technology, which is also cheaper at around $ 85-90 per kWh, or as little as $ 65-70 per kWh for a large OEM, compared to an average of $ 100 per kWh. . for NMC batteries.