It might not come as a surprise, but steel isn’t the only lucrative metal in the industry. In the coming years, we see the global nickel industry entering a period of flux with increasing demand. Nickel is essential in the fast-growing rechargeable market, such as manufacturing batteries for electric vehicles (EV) and the traditional stainless steel market, with ferronickel and nickel pig iron (NPI) dominating the trade. These two distinct commodity segments have brought about a shift in the industry – and shifts in the market equate to more opportunities for investors and business owners alike.
Currently, about half of the global class 1 nickel supply of 2.1 million metric tons (Mt) is suitable for battery production. However, only 350 metric kilotons (Kt) is available to be processed into powder and briquettes that could be used to produce nickel sulphate. The demand for high-purity class 1 nickel is most definitely expected to increase as annual EV production is expected to reach 31 million vehicles by 2025 (See Exhibit 1). This calls for an increase from 33 Kt in 2017 to 570 Kt in 2025.
Traditionally driven by stainless steel production using high-purity class 1 and lower-purity class 2 nickel products, the global nickel market is inching towards change to enable investors to benefit from future nickel industry dynamics.
From 25 per cent in 2009 to nearly 50 per cent in 2016, class 2 nickel has dramatically increased its share of the total supply over the past decade. What serves as the key driver to this increased demand? It is Chinese stainless-steel producers who are seeking to reduce costs by using less expensive nickel units from NPI rather than traditional class 1 nickel. Consequently, this has led to a robust supply-side response, as reflected in Indonesia’s dramatic expansion of NPI production.
The growing popularity of EVs represents a potential boon for struggling nickel producers. The annual production of EVs is projected to expand from a mere 3 million vehicles in 2017 to as many as 31 million by 2025. This serves as a positive indicator for nickel demand – particularly class 1 nickel – as only class 1 nickel, with its high purity and dissolvability, is suitable for battery manufacturing.
Due to this demand, the global nickel industry may enter a period of change – a change that is driven by the shift in end-user demand and the emergence of two distinct markets. One of these markets will be focused on nickel used in rechargeable batteries, which is growing fast with the acceleration of EVs adoption, and the other used in traditional stainless steel, dominated by ferronickel and NPI products.
From the ore to the product, nickel undergoes an intense and long transformation process.
To produce quality products, it is necessary for the metal to go through the metallurgical process stage. With the largest reserves of nickel deposits in the world, Indonesia is no longer content to simply export its raw ore. The country wants to take a central position in the value-added links in the EV supply chain and hopes to leverage its rich reserves to establish a domestic battery supply chain through end-to-end involvement – from mining the ore and refining it to manufacturing the batteries and eventually building the cars.
By doing so, Indonesia will be able to control the raw nickel supply and become an indispensable player in the entire value-added EV supply chain. This added value will also significantly boost the country’s Gross Domestic Product (GDP).
Indonesia’s substantial reserves of nickel highlight the ample growth potential of the industry. We are on track and running speedily towards becoming the world’s nickel capital. And we are not slowing down. The pace of growth will only increase as the nickel industry is expected to gain momentum soon. In doing so, the Indonesian metal industry will attract more investments in downstream projects and further drive new sources of global nickel supply.
©2021 Kimin Tanoto
