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.
5 Mins With ... Tim Mendelssohn, CEO of Spark
Tell us about Spark, how the business started and your objectives?
In early 2019, we launched Spark Commodities (Spark), based in Singapore and backed by Kpler, the industry-leading commodities data & analytics provider, and EEX, a world-renowned global exchange that is part of the Deutsche Boerse Group. The goal was simple; to redefine how commodity markets trade, beginning with creating an LNG freight index. The reality was that we were taking on some of the biggest, most established players in a multi-billion dollar part of the energy industry. However, a strong combination of shareholder support and a strong, in-house developer team gave us the foundation to make an impact. We’ve now got over 200 companies on the platform, 1000+ users and have recently listed our contracts on ICE.
How can modern startups compete with established legacy operators and what are the benefits and limitations for new enterprises?
While we don’t have the legacy of our competitors, we compete by building an organisation that is designed to respond to the market. If you logged into Spark two years ago, and then logged in now, you would see a fundamentally different platform. This iterative approach means we can deliver what our customers need, deploying modern technologies in a more powerful way that adds greater value. The challenge is that you have to build trust through strong, continued and sustained delivery and execution. When your competitors are 100+ years old, well funded and have hundreds of employees, there are no second chances.
We hear a lot about 'customer centric' operations, what does that mean to Spark in the context of the technical industry?
We take customer data to form robust indices that the market can use when managing risk. When creating and developing both the platform and our indices, we must ensure our products are both accurate and valuable. The only way to do this is listening continuously and iterating as the market and their respective needs evolve.
How important are partnerships in attracting and sustaining business?
Without our partnerships, we’d join the long list of companies with good ideas but limited validation. Partnerships, in the form of shareholder structures, collaboration with exchanges (in our case ICE) and developing relationships with key customers demonstrates validation and our ability to add real value. Without this, it’s hard to transition from an idea to a functioning business.
What role will digital transformation play in the energy transition and achieving net zero targets?
It’s a vast subject but conceptually, an increase in digital offerings will facilitate greater transparency, which in turn should lead to greater trust, greater adoption and therefore faster adoption of transition-focused solutions. I believe that transparency will act as a natural accelerant to the process and we aim to be part of that process.