News Aint All Bad for Nickel

COMMODITY CAPERS: It’s been a sad start to the year for the Australian nickel sector after a slump in prices through 2023. By Kristie Batten

Since the start of January, administrators of collapsed junior producer Panoramic Resources have shut down the Savannah mine in the Kimberley region of Western Australia, Andrew Forrest’s Wyloo Metals has suspended its Kambalda operations, First Quantum Minerals announced it would stop mining at its Ravensthorpe operation and IGO put its advanced Cosmos development project on ice.

To say January wasn’t a great month would be an understatement.

But on a global scale, the circa 40,000 tonnes of production that is being removed from the market is barely a blip, accounting for just 1.5% of global mined production, according to Benchmark Nickel Intelligence.

The reason for the 42% nickel price decline in 2023 was a surge in production from Indonesia.

Indonesia accounted for 49% of nickel production in 2023, up from less than 5% just eight years ago.

According to Benchmark project manager Harry Fisher, the 2023 nickel market deficit represented 7% of the global market, the highest since 2015.

Fisher told the Benchmark World Tour stop in Perth last week that the structure of the nickel market was changing and the importance of feedstocks for nickel sulphate for the battery market was increasing.

In 2018, battery demand accounted for just 5% of nickel demand, rising to 16% in 2023.

It is expected to rise to 22% next year, reach 34% in 2030 and 47% by 2040 – all while demand from other sectors, including stainless steel, also increases.

“There’s a huge wave of demand that is coming,” Fisher said.

Global battery capacity was just 60 gigawatt hours in 2015, which surged to 1115GWh in 2023 and is expected to reach about 4000GWh by 2030 and 8 terawatt hours by 2040.

Tesla is expanding its Nevada gigafactory to 140GWh, which alone would require 110,000-125,000 tonnes of nickel per year, representing 23.9% of 2022 global supply.

While Fisher doesn’t see the potential for a “green premium” in nickel any time soon, he said there was the chance of market bifurcation due to ESG and policy considerations.

He noted that less than 20% of nickel units would be compliant with the US’ Inflation Reduction Act in 2030.

While Benchmark forecasts the nickel surplus to increase this year, “we do start to see deficits emerging in the back end of the decade,” Fisher said.

It looks like 2028 could be the tipping point.

Benchmark forecasts US$70 billion will need to be invested in the global nickel market to meet looming demand, a tough ask when existing projects aren’t making money.

So where does that leave nickel explorers?

With some of those big stats and demand forecasts in mind, it’s little wonder that explorers continue to plug away.

In fact, nickel is one of the best represented commodity groups of the 90 presenters at next week’s RIU Explorers Conference in Fremantle.

BHP Xplor, the miner’s exploration accelerator, which has a bias towards nickel and copper, will also be in attendance.

The presenting companies with existing nickel resources, including Chalice Mining, Widgie Nickel, Blackstone Minerals and Lunnon Metals, continue to advance their projects, while companies like Caspin Resources, Dynamic Metals and Legend Mining haven’t given up on making the next big nickel sulphide discovery.

At the end of January, directors of Lunnon showed their faith in the company by spending more than $200,000 on shares via on-market purchases. The cashed-up company is continuing the prefeasibility study on its Baker and Foster projects in Kambalda, despite recent bad news in the region, and is still drilling, albeit at a slightly reduced rate.

Nearby, Widgie has been rolling out the resource updates for its Mt Edwards project as it looks to demonstrate the project could support a standalone operation.

Delegates will also hear from IGO, which has been an aggressive explorer for nickel.