The evidence does suggest a potential supply crunch from 2022.
But necessity is also the mother of invention - and there will be many moves to either avoid or delay the crunch.
Importantly, the potential crunch does not remove risk and does not necessarily make plays such as AUZ a 'no-brainer'. This is how McKinsey Company, for example, rates the Ni opportunities over the next few years:
"The key determinants of the nickel industry’s future will be the extent and speed of EV adoption, the battery technology that becomes the industry preference (NMC, NCA, or a yet-to-be-invented solid-state battery using nickel as a material), and the supply-side response to the changing demand picture. Additionally, these factors will evolve driven by politcal consensus, implementation speed and infastructure requirements, requiring players throughout the value chain to consider what strategic moves to take in light of future industry dynamics.
Nickel miners are facing an important choice. Should they invest in a market that offers future potential, but may not make them a profit at today’s prices? Or would they be better off waiting for the EV sector to mature before investing in supplying its needs? Miners that follow the first path face significant capital outlays. The cost of upgrading refining and processing facilities to handle battery-ready class 1 soluble material can run into hundreds of millions of dollars. The USD 43.2 million investment BHP’s Nickel West made to enable its Western Australia facility to convert class 1 soluble nickel into nickel sulfate is an indicator of how much capital the industry will need to allocate if it seriously pursues the EV battery opportunity.
One way to create a financial incentive for investing in new supplies of class 1
nickel-bearing material would be for miners to create a separate class 1 pricing structure.
By differentiating their pricing structure from the general class 2 and stainless steel scrap nickel prices, class 1 producers would gain a price reflective of their own supply and demand dynamics. This would encourage new supply to be brought onto the market if needed, as class 1 prices would be independent of the downward pull of the low-priced and oversupplied class 2 market.
Battery manufacturers and automotive OEMs will need to develop sourcing strategies to secure sufficient supplies of class 1 nickel to insulate themselves from the risk of shortages and potential price spikes. Indeed lower price volatility, more predictable pricing and less speculation in nickel by financial investors may make nickel more viable as a key raw material for EV batteries. Partnerships between miners and battery manufactures are one possible solution. BASF and Nornickel, for example, are already working together, with Nornickel agreeing to supply the nickel needs of BASF’s future cathode-manufacturing facilities. Volkswagen, meanwhile, has struck a long-term cobalt supply deal with Glencore to ensure the supply of the other critical battery material. By devising creative, long-term contracts that provide incentives for and share the cost of upgrading the material, both sides may stand to benefit.
At the same time, miners, battery manufacturers, and auto OEMs will need to weigh up the considerable risks of investing heavily in the class 1 soluble market for nickel-rich batteries. While the energy density in nickel-rich chemistries certainly makes for a strong choice for use in battery storage, other materials could come along to dislodge it from the battery-making process. Battery technologies such as solid state batteries are seeing massive interest from manufacturers and could completely change the outlook for nickel demand if they become the dominant technology. It is unlikely that these technologies will mature before 2030 however, they should still be tracked closely in case of any breakthrough. The decision is a difficult one, with many interrelated factors and contingencies. But the high stakes make it essential for industry players to weigh their options carefully before crafting future strategies"
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