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Electric vehicle growth is driving nickel prices

Tesla’s electric vehicle (EV) range usually makes the headlines, however this isn’t the only manufacturer looking to create a commercially viable battery powered car.

Source: Bloomberg

General Motors, Volkswagon, Toyota and many other manufacturers are also looking to the future, and with a changing political landscape and environmental focus across the globe, estimates for electric vehicles (EV) projected output is going up. 

A prominent part of this new market is the requirement for long lasting batteries, which hold their change and deliver power as efficiently as possible. Nickel, a prominent component in lithium batteries and traded on the London Metal Exchange, is already reacting to this speculative increase in demand.

Back in 2007, nickel reached an all-time high of over $54,000/tonne before crashing back down, over a number of months, to below $10,000. The market has seen prices begin to creep up again throughout 2017, breaking $13,000 at the end of Q2 2017, before pulling back to sit a couple hundred dollars above $12,000.

The 2007 movement was on the back of critically low stock piles, a booming demand in stainless steel, and irrational plays by hedge funds looking to squeeze shorts out of their long held positions. At the time the market generally knew it was being irrational, however now the price increase seems far more in line with projected growth and figures based in reality. Granted, stockpiles are once again in the spotlight, but it’s the diverse analyst’s estimates in electric vehicle growth and a change in government policy which is pushing this specific base metal higher.

The nickel in these batteries, however, has to specifically be high grade. Half the world’s supply of the metal is currently unsuitable for batter production, so not all nickel miners or producers are set to benefit from this increasing demand avenue. Generally speaking, any producer who’s nickel mines produce so-called ferronickel and nickel pig iron grade metal, are unlikely to benefit from the EV wave.

The companies producing higher grade ores include BHP, Norilsk Nickel, and Vale, which should benefit from this change in demand and higher nickel prices. Most have already started to invest to capitalise on this market opportunity, reopening previously closed mines, setting up new deals with battery manufacturers, and securing long-term contracts. Even the exchanges where the metals trade have looked at offering new product ranges, with the London Metal Exchange suggesting they may offer a specific ‘battery grade’ nickel market at some point in the future.

It will be interesting to watch going forward. Those who trade base metals such as nickel, copper and zinc, (which are also likely to be effected on the back of EV projections), will be keeping an eye on prominent manufacturing figures from EV producing companies, as well as any governmental policy or initiative which supports adoption. 

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