It has been a prolonged and frustrating drought, but the long-sought turning point for those working with nickel may finally be around the corner.

Alto Capital Senior Analyst Carey Smith told National Mining Chronicle 2018 would mark the first time since mid-2012 that the majority of global nickel production would be pro table on a cash-cost basis, with more positive signs ahead.

Mr Smith said a poll at October’s London Metals Exchange week put nickel forward as the base metal with the greatest potential for 2019. While the price of nickel has dropped over the past few months and some mines are still operating at a loss, Mr Smith said indicators suggested the tide was finally turning for the commodity.

About 18 months ago, around 500,000 tonnes of nickel made up global stockpiles – a sure sign of oversupply. But this is no longer the case.

“The initial figure is a lot when you consider global production of nickel is a bit over two million tonnes, so there was roughly 25 per cent of annual world production sitting in warehouses,” Mr Smith said.

However, this figure has since dropped to about 230,000 tonnes. With stockpiles depleting, Mr Smith said a deficit was on its way.

“The belief is that in the next six to 12 months, the stockpiles will get to a level where they will be too low to keep draining more from them and the price will then have to increase to generate more financial benefit for the miners to increase production to meet that demand,” he said.

Vehicles drive demand

Further market disruption by electric vehicles is expected to propel nickel even further. Currently, four per cent of the nickel market is invested in the production of regular batteries, rechargeable batteries and energy storage technologies in general. Nickel is essential to the production of rechargeable batteries, and cannot be replaced with any other commodity.

Independence Group NL Chief Operating Officer Matt Dusci said the use of nickel in batteries was expected to increase substantially from 2020 – largely on the back of EVs.

“It is anticipated electric vehicles will have approximately 40-50kg of nickel in each car as we see the adoption of higher energy density batteries,” he said.

“Nickel is a metal of the future that will make energy storage mobile, efficient and effective enough to make long-term improvements to the lifestyle of hundreds of millions of people across the globe.”

In anticipation of demand, IGO is facilitating a pre-feasibility study into the Nova Downstream Processing project to complement its Nova Nickel-Copper-Cobalt operation. The study will explore the project’s potential to produce nickel sulphate from nickel concentrate for use in the battery storage energy market. It follows successful metallurgical testwork.

“This process could position IGO as one of the lowest-cost producers of nickel sulphate on the cost curve,” Mr Dusci said. “The process would also be considered more environmentally friendly relative to traditional methods.

“Ultimately, using an optimal feed for the downstream processing will reduce capital and operating costs.”

Impact of nickel pig iron

While electric vehicles create an emergent market for nickel, primary consumption remains in stainless steel production.

Nickel pig iron is on the up in this space, with output sharply rising since 2006 and currently accounting for around 30 per cent of nickel produced globally.

China and Indonesia are the primary producers of nickel pig iron, with 650,000 tonnes produced globally this year.

Mr Smith said while nickel pig iron had addressed the technical challenges presented in turning lateritic nickel into nickel metal and impacted prices in the shorter term, it did not necessarily present a direct competitor for the Australian market’s current and future output.

“The one bene t is the nickel pig iron cannot easily be used for batteries, it can generally only be used for stainless steel,” he said. “The larger the battery market grows, the more important the sulphide nickel – which is what we mine in WA – is going to become going forward.”

Australia is one of the largest producers of nickel in the world, and when considering quality and geopolitical risk, it is a quality jurisdiction. Despite this, Mr Dusci said it had been di cult for Australian nickel miners over the past few years.

“The sentiment is changing given the market is expected to remain in a supply/demand deficit for some years due to strong demand for stainless steel resulting in continued drawing down of stockpiles,” he said.

“This, in conjunction with new demand for energy storage and electric vehicles, will ultimately bene t prices.”

Mr Smith said Australia’s smaller scale mines needed the price of nickel to be above US$7 ($9.81) a pound to allow them to restart. However, he expected Australia’s operating nickel mines were making enough money to sustain their production for the next 10-15 years.

“The one benefit is, because this price is in US dollars, our dollar has also dropped from say 90 cents a couple of years ago, down to currently around 70 cents, so that has a big impact for us too, because we get a much better price in Australian dollar terms,” Mr Smith said.

“I suspect next year, the price will probably average between US$6.50 ($9.11) and US$7 ($9.81) a pound, so it’s getting close but maybe not quite there yet.”

Image: Independence Group NL Chief Operating Officer Matt Dusci