I don’t think this that big of a deal. I don’t think Glencore will match what smelters/downstream producers will be able to pay for the offtake. Glencore recently lost their share of Nova offtake to Trafigura and to my knowledge they haven’t really won any significant offtake agreements from producing nickel assets that they don’t own. They are traders (e.g they’re selling it to an end user who would be competing with them for the Cosmos offtake anyway). The net result is that payabilities should go up.
Can they match? Sure, but I doubt they do. Unless their goal is just to stockpile nickel sulphide and try and corner the market like what Sprott are doing in uranium. I doubt that happens but if it does it’s massively bullish for nickel (have a look at the spot uranium price recently). It’s less much likely to happen in nickel sulphides as there’s just less spot volumes available - sales are all usually under term offtake agreements.
It’s why the Cosmos offtake is so valuable. If you’re say POSCO or LG CHEM and are planning on building a downstream sulphate plant then the first question you should be asking is where do you get your long-term supply of nickel from? As IGO mention, you need 10+ years of supply to make the economics work. The interesting thing that I don’t think people have picked up is that IGO would have already known that they needed +10 years of supply before they started planning the plant. You would infer that either they were massively bullish about finding life extensions to Nova in the near term or they were planning on building the plant using another source of nickel sulphide....
There only seem to be two real alternatives. Firstly if you can mine lateritic nickel, smelt it into ferronickel (eg nickel pig iron), refine that into nickel matte, and refine that further into sulphate. Tshingshan said they were going to do that earlier in the year which is why the nickel price cratered in March. Given the recovery in nickel prices since then the market clearly doesn’t think this is viable anytime soon. If you think that technology works then the Nickel Mines share price should be $2.00-$3.00 not $1.00 (not financial advice, don’t buy NIC just because of this). And if you’re producing sulphate this way then it kind of defeats the purpose of putting the final product in a battery cell given how energy intensive smelting is (and all those smelters are currently coal powered).
The second option is you mine lateritic nickel and produce a mixed hydroxide precipitate product (eg what Ravensthorpe and Goro produce). POSCO paid US$240m for 30% of Ravensthorpe and offtake of 7.5ktpa of nickel, starting in 2024 (around when their new nickel refinery is supposed to be completed and starting to ramp up). The issue with this route is the costs - Ravensthorpe’s current nickel AISC are around US$8/lb (and supposedly around US$6/lb if they don’t have issues, but there usually seems to be something going wrong).
An interesting article on POSCO’s plans is below. To note, they are just one of the global players planning massive expansions into battery cell production.
From the article - “By 2030 POSCO aims to produce 220,000 tonnes of lithium and 100,000 tonnes of nickel...”
Where are they finding 100,000 tonnes per year of nickel within the next 8-9 years? 7,500 tonnes locked in with 30% of Ravensthorpe, only 92,500 tonnes per year to go....
