The perfect storm increasing the cost of a crucial metal

By Chris Baraniuk
Technology of Business reporter

Published
A worker assembles the interior of a Volkswagen ID.3 electric car on the assembly line at the "Gläserne Manufaktur" ("Glass Manufactory") production facility on June 08, 2021 in Dresden, Germany.Image source, Sean Gallup
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You can't make electric cars without nickel

In the next few years, millions of people will buy electric vehicles (EVs). All those cars and trucks will run on batteries containing metals such as cobalt, lithium and nickel.

But shortages of metals could potentially hobble the EV boom.

"Not a lot of people realise, we simply do not have enough of these critical materials at the moment mined around the world," says Megan O'Connor, chief executive and co-founder of battery materials mining and recycling firm, Nth Cycle.

Her company has designed a means of extracting nickel and other metals from minced-up old batteries - so that these materials can be used again.

It's called electro-extraction and it works by using an electrical current to separate metals out from crushed up battery waste known as "black mass". The separated metals are isolated and trapped in a special filter.

Nth Cycle's technology extracts nickel, not just from pulverised old batteries, but also from the clumps of rock and metals dug out of mines.

It's potentially a more sustainable method of recovering nickel than traditional techniques such as pyrometallurgy, which Dr O'Connor says is not an environmentally-friendly process.

Image source, Nth Cycle
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Producing nickel the traditional way is carbon intensive says Megan O'Connor

"Think of it like a big furnace, they melt everything at very high temperatures - you can imagine the carbon footprint," she explains.

In the coming years, industry will need all the supplies of nickel it can get as its integral to so many of the products we use daily.

Lithium ion batteries, which power many devices, including your phone, rely on a mix of nickel, manganese and cobalt.

But in some batteries, nickel is by far the largest component, representing 80% of the mix.

The problem is that sourcing nickel, like many materials at the moment, is subject to supply chain headaches caused in part by the war in Ukraine, as Russia is one of the world's biggest nickel suppliers.

Countries such as Indonesia and the Philippines, will likely boost their nickel output as buyers search for non-Russian sources of the metal. Although there are questions over how sustainable this new production will be.

Image source, Getty Images
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Nickel mines outside Russia, like this one in Guatemala, are in demand

Dr O'Connor argues that new mines will not be able to open quickly enough to satisfy rising demand for nickel, which is also used to make stainless steel and wind turbine components. Instead, recycling old batteries will help to "patch" that supply problem, she suggests.

Other companies are also taking this approach, with Redwood Materials in the US already acquiring batteries from the equivalent of between 60-80,000 electric vehicles every year.

"We recover, on average, 95% of the elements from batteries, like nickel, cobalt, lithium and copper," says vice president for communications and government relations, Alexis Georgeson.

But general confidence in the nickel market is yet to return after a difficult episode in March, when nickel's price on the London Metal Exchange (LME) spiked by 250% before falling again. That prompted the LME's operators to suspend trading of nickel for about a week - a more or less unprecedented move.

"It was a disaster," says Keith Wildie, head of trading at metals recycling firm Romco Group, who notes that the price of nickel remains volatile. Although it has fallen again, the price is still around 60% higher than it was at the beginning of the year.

The price shock happened partly because a Chinese firm, Tsingshan Holding Group, had built up a large "short position" in the market - in other words, arranging contracts that bet the price of nickel would fall. When it didn't, the firm was forced to buy back those contracts, or commit to supplying the nickel. Taking either option would result in a huge loss.

The company did not respond to a BBC request for comment.

Image source, Getty Images
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Two thirds of the world's nickel goes into stainless steel

Disruption and panic on the market has subsequently knocked nickel traders' confidence, adds Mr Wildie: "The volumes have absolutely collapsed."

Both the Financial Conduct Authority and the Bank of England have announced reviews into the incident.

In a statement, the LME said, "The LME is committed to ensuring that the actions of all participants… are fully reviewed, and appropriate actions taken to both restore confidence and support the long-term health and efficiency of the market."

However, there were concerns about future supplies of nickel, even before this episode unfolded.

EV maker Tesla, for example, had already moved to secure access to the metal by becoming a technical partner in a new nickel mine on the Pacific island of New Caledonia.

Not all firms can take this option. More than two-thirds of the world's nickel production goes to the stainless steel industry, where it ultimately ends up in everything from cutlery to bathroom taps and washing machines.

Some stainless steel factories in Europe have already cut production, thanks to nickel pricing and supply concerns.

Although Lisa Reisman, founder and executive editor of trade publication MetalMiner, predicts that short term demand for the metal in some industries could fall.

High interest rates might lead to a slowdown of the housing market, which would likely mean fewer people may purchasing new appliances containing stainless steel in the coming months, she explains.

Electric cars will almost certainly require a steady supply of nickel, though.

Earlier this year, market research firm S&P Global Platts forecasted that light duty EV sales worldwide would reach 26.8 million by 2030. The firm noted that EV sales more than doubled between 2020 and 2021.

Image source, Getty Images
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Nickel is in demand from battery makers

Jason Sappor, senior analyst at S&P Global Platts, says the elevated price of nickel probably won't have a major impact on EV sales. But he does say that EV batteries are becoming an increasingly important driver of the nickel market.

Could recycling old batteries help fill the gap, as Dr O'Connor suggests? Maybe, says Mr Sappor - but it requires getting access to enough old batteries to make extracting the small amounts of nickel inside them worthwhile.

"The one issue with that is that there needs to be the existing stock to recycle from," he says. This approach does make sense, he adds, "in the long run".

Dr O'Connor stresses that recycling alone won't be enough to satisfy our nickel needs in the foreseeable future: "We need to start mining more of these materials - and mining them more sustainably."