Preliminary figures for 2025 are forecasting a nickel production surplus of 200,000 tonnes. Employees work at the mining and smelting plant Newco Ferronikeli near the town of Drenas, in Kosovo.ARMEND NIMANI/Getty Images
Nickel prices have been falling since January of 2023 as production outpaces demand, and have dropped significantly in the past two months. Preliminary figures for 2024 indicate another surplus, with production forecast to rise to 3.7 million tonnes and usage to reach 3.4 million tonnes. The preliminary numbers for 2025 are forecasting a surplus of 200,000 tonnes. Is the case for higher nickel prices still there amid the transition to EVs and the need for UPS batteries to accommodate the worldwide increase in artificial intelligence computing?
Pricing
On March 8, 2022, nickel topped US$100,000 per tonne before the London Metal Exchange (LME) halted trading in the nickel market for the first time. The spike was driven by the war in Ukraine and margin calls for Tsingshan Holding Group Co., a large stainless-steel manufacturer in China. Prices since early January of 2023 have been on a downward trajectory from US$30,000 per tonne to sit around US$16,000 now.
Supply
The top five nickel-producing countries are Indonesia (48 per cent), Philippines (10 per cent), Russia (7 per cent), New Caledonia (6 per cent) and Australia (5 per cent). Production in Indonesia in 2023 was 1.7 million tonnes with global production at 3.4 million tonnes. Canada is the sixth largest producer globally (4 per cent) with mines in Ontario, Quebec, Manitoba and Newfoundland and Labrador. Canada has three refineries, in Fort Saskatchewan, Alta.; Sudbury; and Long Harbour, N.L. In 2022, Canada produced 143,000 tonnes of refined nickel. In February of this year, Canada Nickel Co. Inc. announced its wholly-owned subsidiary, NetZero Metals Inc. intends to develop a nickel-processing facility and stainless-steel and alloy production facility in Ontario’s Timmins Nickel District. Engineering contracts were awarded in April.
Indonesia’s nickel production has grown almost tenfold since 2016 from 190,000 tonnes that year to the 1.7 million tonnes mined in 2023. Indonesia’s ban on exports of unprocessed ores, from 2014, although initially weakly enforced, was strengthened in 2020 and led to Chinese companies investing in refining capacity in Indonesia. Prior to 2014, Indonesia only had two nickel smelters operating. By July, 2023, there were 43 nickel smelters operating, 28 under construction, and another 24 in the planning phase. Average production cost in Indonesia is US$15,000 per tonne, less than the global average of US$16,000 per tonne.
Owing to oversupply, BHP announced it is shutting down its Western Australian nickel projects until 2027. In 2021 BHP had entered into a nickel supply agreement with Tesla Inc. for nickel from these facilities.
Demand
Historically, close to 70 per cent of refined nickel went into the manufacturing of stainless steel, with that number now closer to 65 per cent. Electric vehicle battery demand now accounts for 15 per cent of overall nickel production. In 2023, 14 million EVs were sold globally; sales of 17 million in 2024 are forecast.
By 2030 the International Energy Agency estimates EV sales of 45 million vehicles annually or greater than 50 per cent of global sales of all passenger vehicles. Other estimates range from 40 per cent to 60 per cent of global sales at that time.
Global annual vehicle sales are now in the range of 70 to 80 million units. Using the 40 per cent EV projection and a 2-per-cent annual growth in vehicle sales, we would forecast total sales of 90 million units in 2030 with 35 million of them being electric vehicles. Based on an estimate of 40 to 50 kilograms of nickel per vehicle required, we would need between 1.5 and 2.0 million tonnes of nickel annually for these EVs, or greater than 50 per cent of total current production.
A recent trend for major EV manufacturers is a shift from using nickel manganese cobalt (NMC) to lithium iron phosphate (LFP) batteries. While LFP batteries are cheaper, they have a lower energy density, which means vehicles cannot travel as far on a charge as they can with NMC batteries. According to the IEA, the share of NMC battery chemistries in global battery output fell to 54 per cent in 2023 from 61 per cent in 2021. LFP battery usage rose to 40 per cent in 2023 from 28 per cent in 2022 with China leading that transition. The United States and Europe still use more than 90 per cent NMC chemistries for their production.
Other uses for nickel include wind turbines (2,000 kg per turbine) and for UPS batteries and backup systems in AI data centres. Preliminary projections estimate that by 2026, data centres could consume more than 700 TWh (terawatt hours) annually, accounting for more than 2 per cent of global electricity usage.
Outlook
In both the short and medium term, increased Indonesian production along with a slowing EV uptake and switch in battery chemistries are dampening the price of nickel. That price reduction can be somewhat offset by more closings, such as BHP’s temporary shutdown in Western Australia. By 2030, the IEA still sees demand well in excess of supply by one million tonnes annually, which will require substantial price increases or a shift in technology. Price forecasts on Techopedia show prices returning to US$19,000 per tonne by 2029 but we would expect that number to be substantially higher if a one-million tonne deficit exists.
Brian Donovan, CBV, is the president of StockCalc, a Canadian fintech based in Miramichi, N.B.
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