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Open interactive popupWith demand expected to increase from 2.2 million metric tons to somewhere in the range of 3.5 million to 4.0 million metric tons by 2030, the nickel market could become constrained. As per recent media attention, when Tesla’s Elon Musk stated that he would award a “giant contract for a long period of time if you mine nickel efficiently and in an environmentally sensitive way,” the nickel world started to wonder if it is possible to meet these criteria.1 The current challenge is to nearly double supply while meeting environmental, social, and corporate governance (ESG) requirements. On top of that, with nickel being one of the most technically challenging metals to process and refine, and every operation being unique, further challenges will also be asset dependent (Exhibit 1). For miners, the type of ore deposit—sulfide or oxide (or laterite, further subdivided into saprolites and limonites)—defines the whole value chain. Depending on the specific circumstances, every mining method, processing route, and type of generated waste will bring its own challenges for meeting ESG requirements. For smelters or refiners, the type of input material and the presence of impurities will determine the use of certain chemicals, and consequently emission of CO2 and SO2 gases. In general, three main aspects will be considered important by electric-vehicle (EV) OEMs: the ability to provide nickel that is clean, Class 1, and easily accessible.
Can the world find more clean nickel for EV batteries?
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Despite the EV-battery excitement, 74 percent of the market is today still driven by the stainless-steel industry, while batteries represent only 5 to 8 percent of demand. To make stainless steel, both Class 1 and Class 2 nickel are used. Class 1 nickel2 production sees about 70 percent originating from sulfide ores, which are concentrated, smelted, and refined, and approximately 30 percent from limonite ores, which are leached commonly using high-pressure acid leaching (HPAL). Class 2 nickel is produced from saprolites and limonites, which are popular for their use in the stainless-steel industry due to their iron content and potentially low production costs.
For the emerging EV-battery industry, however, the type of nickel—whether it is Class 1 or Class 2—is of the utmost importance. The quality of the nickel used defines the quality and performance of the batteries. While the stainless-steel industry can, to a certain extent, use a mix of Class 1 and Class 2, the battery industry can only use Class 1. Furthermore, following concerns about the origins of another battery raw material, cobalt, EV manufacturers and their clients are seeking to ensure that the raw materials used in their products are mined and refined in an environmentally friendly manner, with positive impacts on local communities, and with a limited carbon footprint.
Class 1 versus Class 2
The main concern with regard to the quality of the nickel that ends up in nickel-rich cathodes is the presence of iron, though other contaminants such as copper also need to be separated. Class 2 nickel and low-quality mixed hydroxide precipitates are accordingly ruled out—at least with today’s technology. Consequently, at best only 46 percent of the world’s nickel production—Class 1 nickel—can be used in batteries (Exhibit 2), and a scarcity of sulfide deposits is contributing to a looming shortage of Class 1 nickel (Exhibit 3). While laterite deposits are vast, the prospects for successfully developing HPAL at large scale and low cost remain uncertain, given the industry’s track record of capital-expenditure overruns, delays, and inability to reach design capacity. Moreover, construction has been significantly delayed by the COVID-19 pandemic.
