Projections of the increasing abundance of electric vehicles (EV) including hybrids, plug-ins and full electric are wide ranging. Wood Mackenzie’s forecast is for sales of passenger EVs to increase from 2.4 million in 2016 to approximately 14.2 million in 2025. In battery capacity terms, this is the equivalent of an increase from 26 GWh to 215 GWh over the same period. Most of the batteries generating this power are expected to be based on nickel-containing chemistries.
There are two basic types of EV batteries containing nickel: nickel metal hydride (NiMH) and lithium ion (Li-ion). NiMH has long been the preferred battery type in hybrid EVs although we expect it to be largely replaced by Li-ion chemistries by 2025. Not all Li-ion variants contain nickel (eg, lithium iron phosphate, LFP) but the present consensus is that NCM (NiCoMn) and NCA (NiCoAl) will remain the dominant formulations for the foreseeable future. At the same time, we believe that the portion of nickel in NCM batteries will increase, partly in response to the impact of high cobalt prices on battery cost, but also because of the improved energy density that nickel imparts. Thus the preference looks set to evolve from NCM 111 (20% Ni), to NCM 523 or 622 (30-36% Ni). NCM 811(48% Ni) is under development although the rigours of testing and certification indicate that commercial use of such a battery is no closer than 3-5 years away.
There is a wide range of assumptions that have to be made in order to estimate how much nickel could be consumed in EV batteries by 2025. These include predictions of EV sales both in terms of number and vehicle type, the relative shares of the different battery types used by the fleet and the average battery capacity of each vehicle type. Using this top down approach, Wood Mackenzie estimates that nickel demand in EV batteries increases from about 40 kt in 2016 to an estimated 220 kt in 2025[1]. When all other battery applications are included, such as consumer electronics and energy storage, another field of potentially substantial future growth, this figure increases to 275 kt nickel demand in 2025, approximately 12% of global supply in 2025.
Not surprisingly, such top down estimates of nickel demand lead to wide ranging estimates depending on the assumptions that are made. Ultimately, however, assuming the order of magnitude of these estimates is reasonable, the question to ask is: can we find enough nickel to feed such future demand?
To answer that question we first have to look at the type of nickel that is suitable for use in making battery cathode materials. It is not simply a case of finding enough nickel units. The principal feed chemical for cathode precursors is nickel sulphate (NiSO4), which is made essentially by dissolving nickel in sulphuric acid. Ideally, the nickel raw material is pure metal – Class 1 nickel – preferably as powder, pellets or briquettes. Cathode plate can also be used but energy requirements are greater and dissolution times are longer, making that process a more cost intensive one.
In contrast to pure metal, FeNi and NPI are not suitable feed materials (or at least not ideal) for NiSO4 production. Therefore, about half of global nickel production is not available for battery NiSO4. In 2017, about 60% of the other half of world supply is nickel plate, with only the balancing 40% comprising briquettes, powder, pellets or chemicals.
There has already been significant growth in the production of NiSO4 around the world to feed the expanding EV market. In addition, there are several options open to battery makers from existing supply and stocks which would ensure they obtain the quantities of nickel they might need to support the growth in EVs. However, this does not solve the problem of deficits in the wider market. If nickel is side-tracked to the battery supply chain, away from pre-existing consumers, once stocks have been depleted the issue for the nickel market is one of finding alternative nickel units for those consumers. EV consumers may get their nickel but everyone else could be left short.
The outlook for nickel is one of deepening deficits, falling stocks and rising prices. The widely anticipated expansion in electric vehicle (EV) sales is likely to exacerbate the predicted structural shortage in nickel between now and 2025. The dominant Li-ion battery type for EVs is expected to have a nickel chemistry. Sourcing this quantity of nickel will be a challenge as most of incremental primary supply through to 2025 will be FeNi or NPI, both of which are unsuitable raw materials for battery NiSO4. However, secondary recyclers of nickel are likely to expand and we expect existing producers of nickel briquettes to re-direct nickel, as powder, to the NiSO4 makers. This supply could be further boosted by the substantial inventory of briquettes held in LME warehouses. Beyond that, new projects may focus on producing nickel intermediates (such as nickel hydroxides) for direct use as feed for NiSO4 rather than for processing through to finished metal.
[1] Passenger vehicles only using NCM 111 chemistry
