Emily Pickrell, UH Energy Fellow
The rise in nickel prices over the past month, which soared in reaction to the war in Ukraine, is a good example of how even a commodity can cause supply chain headaches for the energy transition, under the right conditions.
A reliable source of nickel is vital for electric cars, as it is used in small quantities for lithium-ion batteries. On a broader level, the consultation highlights wider consultations on the value (operationally, environmentally and financially) we are willing to pay for a low-carbon future.
Although nickel deposits exist all over the world, for the past two years there has been a shortage of high-quality nickel, which is more expensive and more difficult to extract than lower-quality nickel. Companies like Tesla are concerned about the impact on imaginable long-term shortages, as demand for electric cars increases. Tesla CEO Elon Musk said in early 2021 that the imaginable shortage of nickel was considered to be the main threat related to the use of lithium-ion batteries.
This brings us to Russia, one of the world’s leading suppliers of nickel at a competitive price. About 11% of global nickel production last year came from Russia, but its resolve to invade Ukraine confused Russia’s supply.
At the beginning of the invasion, the West banned imports of certain Russian products, followed by Russia’s announcement that it would withhold exports. Nickel has not been a specific target, but recent price changes reflect fears that it will be included in the future. The London Metal Exchange is also blocking Russian deliveries, providing even less security about Russia as a long-term source of metal.
These problems have wreaked havoc on the nickel market for the past two months. Prices on the London Mercantile Exchange (LME) recovered around $20,000 per metric tonne through the end of the year but began to rise in early February in reaction to the war. Fears
In the last week of March, stock market values closed more than five times higher, when trading was temporarily suspended. The short speculative sale of nickel was largely to blame for the transitory price spikes and continued to fluctuate, trading at $35,000 per metric ton as of March 24. (The LME has set daily value limits to combat the impact of short-term assumptions on securities. )
According to Margaret Kidd, Supply Chain Program Director
“Supply chains take geopolitical risks into account,” Kidd said. “However, this existing sanctions circular is common and unprecedented, even in the complex world of commodities. “
To clarify, nickel is not a scarce resource like lithium, which has attracted a lot of press attention for its role in the semiconductor shortage. Lately, nickel is mined in many countries of the world. Indonesia, for example, lately produces about 3 times as much nickel as Russia, while Australia, New Caledonia and the Philippines roughly match Russia’s production rate. And several countries have nickel reserves that rival Russia’s, adding to Latin American neighbors Brazil and Cuba. There are also significant reserves of nickel in the rear. of the ocean.
Therefore, the challenge of supplying nickel is not to locate it yet to ensure maximum competitive value. The value depends on the quality and relative difficulty of exploiting it. High-quality nickel (called Class 1) has a nickel content of 99. 98% or more and comes from sulfide deposits. These sulphide deposits come from a lower intensity and are more expensive for mining in general. High-quality nickel is the only nickel suitable for the production of nickel sulfates used in the manufacture of batteries.
Maintaining a reliable and cost-effective source of nickel is for the energy transition, in part because nickel plays a role in the functionality of electric vehicle batteries. Nickel is particularly suitable for increasing the range of electric vehicle batteries. Increasing the amount of nickel in a battery’s cathode can increase its power density, which means longer battery life in line with the pound of battery.
“There are very few substitutes for nickel,” said Ramanan Krishnamoorti, a professor of chemical engineering and director of energy at the University of Houston. it was considered nickel, basically because the price was so low. “
Price spikes, while likely to be temporary, are still significant. In the short term, they disrupted battery production. For example, Chinese nickel sulfate manufacturers stopped offering products because they found it too complicated to realize how theories distorted actual value increases due to shortages, according to Rystad Energy. The uncertainty has also led Spanish stainless steel maker Acerinox to temporarily suspend the supply of nickel orders, Bloomberg reports.
And while ELECTRIC vehicle batteries require only small amounts of nickel, Morgan Stanley analyst Adam Jones says a price increase like the one seen in February, if permanent, could boost the value of electric vehicles by $1,000.
In the long term, there is also a developing problem. Jones’ metals and mining team had forecast a nickel shortage until 2026, even before the Russo-Ukrainian war.
The incredibly volatile costs of the past month also how inelastic the demand for key minerals can be in the short term.
“Nickel reacts strongly to beliefs and feelings,” said Andrew Mitchell, director of nickel at Wood Mackenzie.
These types of value bounces are new to nickel. In March 2021, when Chinese nickel maker Tsingshan announced plans to manufacture a substandard nickel matte in Indonesia and, boom!, values fell 20% in 48 hours.
“Nothing at the time had fundamentally changed, just the belief of what would happen eventually,” Mitchell said.
The newest sudden surge in costs was caused by a competitive sell-off in the market and an overreaction from the market, Kidd said. In this regard, nickel costs are expected to fall. They will also receive help through new advances in nickel mining generation in the medium term, which will make high-grade nickel mining cheaper.
But it will be consistent with the value of $20,000 per metric ton in 2021, due to how long-term demand for electric cars is driving the nickel market. Nickel, and although the existing drop in nickel production will be opposed due to emerging values, it will take some time.
Meanwhile, the remoteness of that even smacks of dependence on Russia begs the question: how did we get here in the first place?
Nationally, over the past five years, there has been a slow decline in demand for nickel alloys in the U. S. In the U. S. , which are used in the oil and fuel sector as well as in aviation, according to the U. S. Geological Survey. USA During the same period, global production from nickel mines also fell by 5%.
These two points facilitated trust in Russia as a reliable and commercial spouse so it needed nickel.
And while this total nickel drama seems to be being resolved, at least in the short term, it raises a vital political point: the chains of origin that want to evolve for the transition of power and the costs to pay to do so.
President Biden has targeted a 50% percentage of electric cars in the new vehicle market through 2030, but the satan at the main points turns out to be how we can make key materials like nickel available at competitive prices.
Most likely, more mining excavations will need to be pushed nationally, even if the lengthy licensing procedure and environmental setback in much of the United States discourage it.
One such proposed mine in Minnesota is recently going through the clearance procedure with plans to be operational until January 2026.
While the mine itself is controversial, it will need to be better identified that those projects could be mandatory, or determine which countries we are willing to do business with, at what price, if we want to have a serious long term for electric vehicles.
Emily Pickrell is an energy journalist with more than 12 years of experience covering everything from oil fields to water trade policies to Mexico’s latest climate update laws. Emily has reported on energy issues in the United States, Mexico, and the United Kingdom. In journalism, Emily worked as a policy analyst for the U. S. Government Accountability Office and as an auditor for the foreign aid organization CARE.
UH Energy is the University of Houston’s energy technology education, research and incubation center, working to shape long-term energy and forge new business approaches in the energy sector.