Electric vehicles could be a game changer for high-grade nickel producers
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Dan Lougher: Western Areas is in talks with companies keen to buy its new product for the battery market. Ryan Stuart
by
Tess Ingram
Strong interest in a new battery-grade nickel product Western Areas plans to produce reinforces suggestions the growing electric vehicles sector could deliver a "renaissance" for the flagging nickel market, Western Areas managing director Dan Lougher says.
Western Areas started work in the June quarter on its mill recovery enhancement project, which plans to produce a high-grade nickel concentrate product from its
Forrestania nickel operations in Western Australia from the March quarter of 2018.
While the project will produce only about 1400 tonnes of the 45 to 50 per cent nickel concentrate, compared to Western Areas' annual nickel production of about 25,000 tonnes, Mr Lougher said the Perth-based miner had already fielded interest in the product from multiple global battery market players.
"Last week we had conversations with three separate Chinese groups," he said.
"Prior to that we were talking to traders and the usual suspects with refineries, because this product can be put directly into a refinery rather than a smelter, and obviously we have been talking to large groups who are non-Chinese.
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"I can't elaborate more than that other than to say they are very closely linked to the current electric vehicle battery supply market."
Mr Lougher said the Chinese parties were keen on securing product from about 2020, reinforcing the view of UBS analysts in a research note last week that from about 2020 "electric vehicles could offer a renaissance for the nickel market".
The analysts said the production of about 15 million electric vehicles in 2025 would create between 300,000 and 900,000 tonnes a year of additional demand for nickel, or a 10 to 40 per cent increase, depending on the type of chemistry used to create the battery cathodes, which is where the nickel is used.
The battery boom could deliver price premiums to nickel producers able to produce high-grade nickel products, such as ASX-listed Independence Group and Western Areas, UBS said, rather than the ferronickel and nickel pig iron producers that account for about half of global supply.
At present about two-thirds of total demand for nickel is for the production of stainless steel, which can tolerate lower grade nickel.
"Only about 50 per cent of world nickel mine production is potentially suitable to become a battery product," UBS said.
"These producers of high-grade nickel products could potentially benefit from the emergence of price premiums vs ferronickel and nickel pig iron products as battery demand increases."
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