Nickel could steal lithium’s thunder

Lithium has attracted plenty of interest in Western Australia’s political and investment circles during the past two years but another, perhaps more important, metal is emerging as a rival for the title of battery champion – nickel.

Largely forgotten in the rush of build new lithium mines and processing plants are early signs of a new nickel boom, with the price of a metal once intimately linked with the production of stainless steel at a four-year high (and heading higher).

The revival of nickel, prices of which have risen by 75 per cent since this time last year, from $US4 a pound to $7/lb, has the potential to inject life into depressed parts of regional WA where mines were mothballed in the downturn, and cause some of the world’s biggest mining companies to change the way they operate.

BHP, the reluctant owner of the Nickel West business, has suddenly found that it is a player in battery metals through the Kalgoorlie nickel smelter and the Kwinana nickel refinery.

Officially, BHP’s nickel operations remain for sale; but the price recovery has flipped them from a loss-making proposition to one that’s modestly profitable, which will aid the sale process (if that’s what BHP still wants to do).

Ravensthorpe, a nickel processing facility closed last year by its Canada-based owner, First Quantum Minerals, would today be reasonably profitable thanks to its metallic mix of nickel, and the hottest of all battery metals, cobalt.

The significance of the improved outlook for nickel is only just being appreciated, with a number of small mining companies set to benefit as they move to re-open mines, along with the economy of Kalgoorlie, which has been handed an opportunity to promote itself as WA’s battery metal capital thanks to the potential of nearby mines to produce most of the metals needed in batteries, including graphite.

Nickel, however, has the potential to dominate WA’s fast-growing battery-metals sector for two reasons.

Firstly, nickel is not as common as lithium and not all nickel is suitable for conversion into a chemical form preferred by battery manufacturers. Much of WA’s nickel, especially that mined around Kambalda, is ideal for battery-grade chemicals.

Secondly, the battery boom is expected to place increased pressure on supplies of nickel, most of which (around 80 per cent) is currently consumed in the production of stainless steel, with just 3 per cent going into batteries.

Over the next 10 to 15 years, however, the demand for nickel in battery production is tipped to soar to 40 per cent of global production, a dramatic increase but one that will occur as demand for stainless steel continues to edge up.

In other words, nickel will go from being a metal with one major use to one with two major uses and limited supply, even as old mines are brought back into production.

Investment bank Citi recently examined what it described as a ‘breakdown of the correlation’ between nickel and stainless steel, which can best be seen in the nickel price rising even as the stainless steel price has been falling.

“The nickel price is up 40 per cent since October (and 75 per cent since last June), however Europe-listed stainless steel companies are down 15 per cent on average,” Citi said.

“Hence, what had historically been a good leading indicator of stainless steel prices has stopped working in the past seven to nine months.”

Nickel, Citi said, was a new, key input in emerging battery technologies, with the potential for years of strong demand growth.

Driving everything in the battery-metals sector are optimistic forecasts for future demand of electric vehicles.

“The electric vehicle theme is not disappearing any time soon, and neither is the rate of capacity build in stainless steel in Indonesia and China,” Citi said.

Tipping the future price of nickel has always been tricky, and it is a metal with a well-earned reputation for extreme price moves, soaring to more than $US22/lb in 2007 before crashing to $US3.70/lb in 2015.

But that all-time price high was at a time when stainless steel was the sole driver of the nickel price.

Today, there are two price drivers, with the combination of demand from battery metals and stainless steel likely to push the price steadily higher, triggering the rebirth of WA’s nickel sector and underpinning a revival of the Kalgoorlie economy.