McKinsey: EV batteries driving demand for clean nickel
Global demand for the metal nickel is expected to increase from 2.2 million metric tons to somewhere in the range of 3.5 million to 4.0 million metric tonnes by 2030, a report from McKinsey & Company has found.
According to the report – How Clean Can the Nickel Industry become? – 74 percent of the nickel market is still driven by the stainless-steel industry, despite growing interest in the electric vehicle battery segment, which currently only represents five to eight percent of demand.
In order to make stainless steel, both Class 1 and Class 2 nickel are used. Class 1 nickel 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 as 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.
Therefore, despite being abundant globally, the world’s supply of nickel suitable for batteries may not be as copious as it seems. As Original Equipment Manufacturers (OEMs) begin to define requirements in relation to the raw materials they use – quality of the nickel, environmental impacts, social concerns and geopolitical issues – the size of the pie will suddenly start to diminish and will be different for each OEM, depending on their requirements and restrictions.
Given these uncertainties, the McKinsey & Company report states that some OEMs might prefer to decrease their dependency on nickel and turn to lithium iron phosphate batteries for certain models and geographies.
Meanwhile, miners will be faced with the challenge of meeting technical criteria and qualifying themselves as suppliers of an increasingly differentiated range of nickel products in terms of their quality and impurities (such that nickel and its products will become less and less a commodity), while simultaneously demonstrating to the rest of the EV value chain that the nickel they produce is clean from both a social and environmental standpoint.
Responding to this interest in clean nickel, some junior mining companies have already announced ambitious plans for CO2-neutral production to increase the value of their assets and spark investor and OEM interest. It is now up to the current operators to follow the same trend, the report concludes.