Nickel buyers on the London Metal Exchange (LME) got a taste of this feeling at the end of February. The metal’s price dived from almost $20,000 (£14,500) a tonne (t) in the last week of February to just over $16,100/t by the first week of March.
There wasn’t a fusion-level discovery or even a scientific breakthrough but Chinese steelmaker Tsingshan sent shockwaves through the mining industry when it announced (on WeChat no less, according Reuters) it had signed a deal to supply two battery manufacturers with 100,000 tonnes of nickel matte. Some context is needed for this to make sense as news that could knock 20 per cent off the nickel price.
The market for the metal is split into class 1 and class 2, where Class 1 is higher purity and the only kind allowed on the LME. Class 1 nickel is the kind needed by lithium-ion battery manufacturers, while class 2 is mostly used to make stainless steel. The difference between them is largely defined by the type of deposit in the ground, with laterite ore becoming class 2 nickel.
Interest in class 1 nickel projects has ramped up in recent years because of forecast electric vehicle (EV) demand. Tesla (US:TSLA) and its battery partners have largely phased out the use of cobalt in favour of nickel, and Elon Musk has said he is more concerned about nickel supplies than any other metal used for EVs.
This Tsingshan deal effectively sees the company promise to fill class 1 demand with class 2 supply, possibly removing the price gap and supply concerns. Nickel matte, which Tsingshan is selling, is the last step in a lot of processing that sees Tsingshan’s laterite ore turned to nickel pig iron, then into nickel matte, which can be then processed into pure nickel as needed by the battery makers. This isn’t just sending the ore around the plant a few more times, this process will add cost and the carbon footprint compared to class 1 nickel supply.
Environmental concerns are never far away when nickel is concerned.
Tsingshan has previously managed to generate some level of notoriety outside the metals world thanks to a plan to dump millions of tonnes of mine waste into the sea in Indonesia. While this has been rethought, the processing needed to turn the ore from these mines - high-pressure acid leaching (HPAL) - is still extremely expensive and hard to get right, on top of needing huge amounts of power, often from coal plants.
All that said, there is a reason companies like Tsingshan are working hard to supply battery makers. BMO Capital Markets said the nickel price drop on the LME was a buying opportunity, “given underlying strength in nickel demand”, and Tesla has just signed on as a technical advisor to a troubled mine and HPAL processing plant in New Caledonia for access to its products.
Tesla has already started to transform one power-hungry, environmentally-damaging industry with its EVs, perhaps it could do the same for nickel mining.
