Downstream PFS earning estimates, page-36

Perfect delivery for BSX timeline

https://www.northernminer.com/global-mining-symposium/global-mining-symposium-demand-for-nickel-in-ev-batteries-could-lead-to-supply-shortage-in-the-next-couple-of-years-says-mckinseys-ken-hoffman/1003831172/#.YKspO9Yr8F0.twitter


Global Mining Symposium: Demand for nickel in EV batteries could lead to supply shortage in the next couple of years, says McKinsey’s Ken Hoffman

BY: CARL A. WILLIAMS MAY 22, 2021

The growing market for electric vehicles is likely to see increased pressure for nickel, a critical component for the nickel-manganese-cobalt (NMC) batteries used in EVs, Ken Hoffman, senior expert at McKinsey’s Basic Materials Institute, said during The Northern Miner’s Global Mining Symposium in May.

In an interview with Frik Els, executive editor of MINING.com, Hoffman said that sales of EVs reached over 3 million units last year, up from around 22,000 a decade ago.

“If it weren’t for a shortage of [micro]chips in 2021, you’d probably be looking at 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, about 20% to 25% of global nickel production is going into EVs as class 1 products.”

With nickel content greater than 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 top stainless-steel producer, announced plans to produce nickel sulphate from nickel pig iron for use in EV batteries.

The announcement saw the London Metal Exchange three-month nickel price drop 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 Global Market Intelligence reported.

Since then, the nickel price has dropped to about US$8,000 per tonne, Els pointed out.

“That’s the brilliance of Tsingshan,” Hoffman said. “They recognized years ago that there were considerable amounts of nickel in Indonesia, but it contained high quantities of iron. So, Tsingshan melted the nickel ore to produce 6%-12% nickel concentrate, which they used to make stainless steel.”

At that time, he explained, the world was running short of nickel, and prices were nearing US$50,000 per tonne. Tsingshan’s method of mass-production, he said, drove nickel prices down to around US$8,000 per tonne, with “many in the industry burnt by that.”

According to Hoffman, the process Tsingshan plans to use isn’t new, and dates to the mid-1970s. “It didn’t work fantastically well. It’s not cheap either. The purity of the product is another issue too.”

Contracts for nickel products are often required to specify impurities down to the parts per billion, he noted. In particular, the presence of iron in the product can detrimentally affect the EV battery’s performance.

However, Hoffman said he hopes that Tsingshan’s plans work, as every U$1,000 increase in the nickel price adds about US80¢ per kilowatt-hour (kWh) to the cost of an EV.

“If prices increased by US$10,000-US$15,000 per tonne, you’re looking at about a 20-30% increase in the cost of the battery,” he explained.

Hoffman’s single biggest fear for the EV battery market is that nickel prices will go so high that battery manufactures will look for substitutes and move 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 bust.”

Automobile manufacturers are hoping that nickel prices settle in the low-to-mid-US$20,000s per tonne range, which is the figure that mining executives will start to “believe that the nickel market is real, and start to invest in new mines.”

The current bottleneck on EV production is limiting demand for nickel, Hoffman said. Once this bottleneck is alleviated, there will be increased pressure on nickel supply chains, which could lead to shortages within the next couple of 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 there is a lack of smelters outside Indonesia. “Finding mines is a lot easier than having to put the US$1-2 billion needed to build a smelter,” Hoffman said.

Hoffman believes that the European Union and the U.S. should put the billions they’ve pledged for the EV industry into building smelters and refineries.

“We always tell mining executives to lock themselves into contracts with OEMs [original equipment manufacturers] as they will tell you what products they will need in the future, not the ones they need today,” he added.

He noted, for example, that Tesla and Volkswagen are looking to source nickel powder, but current world production is only 30,000-40,000 tonnes per year. “If suddenly you need 500,000 tonnes of nickel powder, where’s it going to come from, who’s going to make it, and where’s it going to be refined?”

While nickel is excellent for making batteries, OEMs are exploring a basket of battery chemistries based on other metals, Hoffman said, including lithium-ion manganese oxide (LMO) and lithium-iron-phosphate (LFP).

“The manganese market is about ten times larger than the nickel market, with the metal broadly distributed worldwide, and has led to a resurgence in LMO batteries,” he said.

Els noted that LFP batteries currently account for around 15% of the total global market share.

The LFP technology has been around for over 40 years, Hoffman said. “However, batteries that use LFP chemistries generate only about 170 watts of power per kilogram of battery weight, which is no different to where they were 10-15 years ago.”

The best-in-class high-nickel batteries, he said, operate at nearly twice that – at about 300 watts per kilogram of battery weight.

“So, why is there so much talk about LFP batteries?” Hoffman asked. “It’s partly about optionality: If around 3-4 million EVs consume 200,000 tonnes of nickel, then what happens when we get to a world with 80-100 million EVs, the global demand for class 1 nickel will run to over 4 million tonnes, leading to supplies of nickel running out very quickly.”

The LFP chemistry offers car manufacturers with an alternate battery technology, which is also less expensive at around US$85-90 per kWh, or as little as US$65-70 per kWh for a large OEM, compared with an average of US$100 per kWh for NMC batteries.