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Demand for electric car batteries, fears of shortages driving up nickel prices

The long-awaited increase in nickel prices has materialized this week, with prices rising to US$6.44 a pound Wednesday, up 6.8 per cent in the last month and up more than 14 per cent since the beginning of 2019.
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Nickel prices have risen by 6.8 per cent in the last month, hitting US$6.44 a pound on Wednesday. (File)

The long-awaited increase in nickel prices has materialized this week, with prices rising to US$6.44 a pound Wednesday, up 6.8 per cent in the last month and up more than 14 per cent since the beginning of 2019.

Analysts say the increase is related to both short- and long-term factors. In the short term, Indonesia has announced it plans to ban ore exports in 2022, after lifting the ban in 2017. While there is skepticism that would actually happen, the threat was enough to boost prices.

“If we were to see Indonesia restrict availability of their ore, then it would tighten the market quicker than we're factoring in,” analyst Colin Hamilton at BMO Capital Markets in London told Reuters.

A long-term factor behind the rising prices is increasing demand for nickel to make electric vehicle (EV) batteries. As electric cars become more popular, demand for the high grade nickel needed for the batteries is increasing.

And newer EV batteries have a much higher nickel content, as manufacturers use less cobalt.

That's in part because much of the world's cobalt comes from the Democratic Republic of Congo, where child labour and other human rights abuses are common.

Last week, Volkswagen announced plans to invest US$56 billion on electric car batteries to encourage the mass production of electric vehicles. Those batteries will have a much higher nickel content and lower amounts of cobalt.

While nickel prices slumped earlier this year, and only now are close to where they were in July 2018, long-term prospects are strong, analyst Terry Ortslan told Sudbury.com last last year. 

Ortslan predicted prices would slump in the first part of 2019 before recovering as demand for EVs increases.

"We all know batteries for electric vehicles are going to be very important new demand source of nickel, as much as stainless steel was 50 or 60 years ago," he said in November. 

"So for the battery grade nickel that both Vale and (Glencore) produce, there's no problem. I think there's going to be a great market for it. I'd be really surprised if, once we go through this uncertainty over the next three or four months, nickel prices aren't back in the saddle again."




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