Market research firm Fitch Solutions Country Risk and Industry Research (Fitch Solutions) said in its July 8 "Global Nickel Outlook" report: The Russia-Ukraine conflict has created uncertainty about the global supply of mined nickel - especially High-grade nickel used as battery-grade nickel in the electric vehicle (EV) industry.
Last year, Russian miner Norilsk Nickel alone provided about 17% of the world's primary nickel supply. Overall, Russia accounts for about 21% of global primary nickel production, followed by Canada with 17%, Australia with 14% and China with 10%.
While nickel is the fifth most common element on Earth and is currently mined in more than 25 countries, high-grade sulfide deposits located in mature mining areas are mostly depleted and require new and riskier jurisdictions Do additional exploration.
However, apart from the uncertainty surrounding Russia, high refined nickel prices and less disruption from the Covid-19 outbreak could lead to strong growth in nickel mine production this year and next, Fitch Solutions said.
The most important driver of this growth will be a recovery in production in Indonesia and the Philippines, where the Covid-19 outbreak has severely mining activity in 2020 and 2021.
Output in Indonesia was hit particularly hard last year, Fitch Solutions said, as a record number of Covid-19 cases led to the country's reimposition of lockdown restrictions. Fitch Solutions forecasts that global nickel production will grow at an average annual rate of 3.1% through 2026, before accelerating to an average of 5% by 2031.
Still, Fitch Solutions said both growth rates would be below the 6.6% year-on-year average achieved between 2010 and 2019, driven by higher nickel prices at the time and strong growth in Indonesian production. Fitch Solutions also said it expects annual global nickel production to reach 3.65 million tonnes by 2031, up from 2.46 million tonnes in 2021.
"As battery-grade primary nickel undergoes significant demand growth brought about by the green transition, the main supply risk and obstacle for battery makers is adequate primary supply," Fitch Solutions said.
Meanwhile, the company says the main potential "game changer" is the successful conversion of secondary nickel (low-quality nickel with a nickel content below 99.8%) to primary nickel.
However, the process, while promising, remains technically and environmentally challenging, which Fitch Solutions said points to tighter supplies of battery-grade nickel over the next two to three years - at a time when EV sales are expected to flourish. On the other hand, the supply of non-battery-grade nickel will remain ample.
Fitch Solutions said Australia and Indonesia would remain the world's largest suppliers of nickel. However, Australia will overtake Indonesia with its endowment of high-grade primary sulphide ore, while Indonesia plans to catch up by trying to convert its secondary nickel ore to primary.
The company also highlighted significant high-grade nickel opportunities in Canada, with substantial high-quality sulphide ore resources. Canadian Nickel also enjoys a better sustainability record and lower emissions than its competitors.
Overall, Fitch Solutions said high nickel prices and blocked nickel ore flows from Russia will drive investment in nickel ore from other markets, including Indonesia, the Philippines and Australia. This will lead to strong growth in nickel ore production this year and next, especially in Indonesia and the Philippines.
However, the company said the most vulnerable part of the global nickel ore supply pipeline - outside Russia - is in Indonesia, and any delay in the development of downstream nickel processing facilities could lead to the grounding of the country's nickel ore, reducing incentives for miners to boost output .
In addition, Indonesia will need to overcome technical challenges to cost-effectively convert an ample supply of secondary nickel ore into battery-grade primary nickel.
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