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Nickel’s price paralysis could see mines ‘gobbled up’ cheap

Peter Ker

Peter KerResources reporter

May 25, 2023 – 3.59pm

Miners say pricing mechanisms for nickel have struggled to keep pace with the industry’s shift to supplying the specialised needs of battery and electric vehicle makers, creating an opportunity for acquisitions on the cheap.

Australian nickel was traditionally sold to stainless steel producers in briquettes or powders, but miners such as BHP now sell the bulk of their nickel to electric vehicle manufacturers like Tesla, which want nickel for the cathodes of lithium-ion batteries.

BHP has built a new processing plant at Kwinana in WA to make nickel sulphate crystals, a form of the metal that is particularly desirable to battery makers.

No public daily market price for nickel sulphate crystals exists, leaving battery makers and other newcomers to negotiate premiums above the nickel price index the London Metals Exchange has published since 1979.

“The nickel product suite has evolved quite rapidly and we need the pricing mechanisms to evolve with that as well,” BHP nickel boss Jess Farrell said at The Australian Financial Review Mining Summit.

Billionaire Andrew Forrest has spent the past two years buying nickel assets such as Canada’s Noront Resources and Australia’s Mincor Resources through his private company Wyloo Metals.

Wyloo chief Luca Giacovazzi said he planned to take full advantage if markets did not properly value nickel for its role in batteries.

“I would definitely say it’s an opportunity. I’m quite happy for everyone to keep mispricing nickel so we can gobble up assets,” he joked.

Market confidence in the LME’s benchmark nickel price index was damaged in March 2022 when the blacklisting of Russian nickel supply triggered a price rally, which was exacerbated by some participants needing to rapidly buy physical nickel to settle bets that the price would fall.

The result was a 270 per cent rise in nickel prices in the space of three trading sessions.

The rally prompted the LME to halt trading, rule some trades as invalid, and subsequently impose limits on daily price movements. The LME’s response to the market turmoil is now the subject of legal disputes in British courts.

Mr Giacovazzi said the split between new types of nickel for batteries and traditional nickel products was not the only challenge facing the nickel price setters.

“The other interesting aspect with nickel is obviously we can make it out of two different forms of geology. There’s sulphides and there’s laterites,” he said.

“I think the world will start to pay a premium for nickel that’s produced in a greener way and that’s really sulphide nickels that you find in places like Australia and Canada, which is the two areas that we’re heavily invested.

“If it’s not a premium for that nickel [sulphide geology] then the others are certainly going to get a discount and I think you’ll start to see that play out with some of the car companies as they’re making batteries for these vehicles that they’ve been selling to customers who are quite conscious about these ESG [environment, social and governance] factors.”

Laterite nickel deposits are typically turned into “nickel pig iron” which contains about 14 per cent nickel.

The LME nickel price is underpinned by trading of metal that is 99.8 per cent nickel. But while 99.8 per cent nickel metal is the benchmark against which other nickel products are priced, it accounts for only about 25 per cent of global nickel volumes.

The LME has considered creating additional nickel price indexes, including one for nickel pig iron to reflect the fact it is the biggest nickel product by volume.

Other price providers such as Fastmarkets have since started publishing regular prices for nickel sulphate.

Confidence in the LME’s nickel price index took another hit in March, when some trades were cancelled because physical delivery of the commodity revealed bags full of stones rather than nickel.

Peter Ker covers resource companies for The Australian Financial Review, based in Melbourne. Connect with Peter on Twitter. Email Peter at pker@copyright link

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