Tesla chief executive Elon Musk will be pleased that the price of nickel, an important battery metal, has crashed but his joy might be short lived because there are concerns that a new nickel processing technology might not be as “green” as he would like.
Over the past few days nickel on the London Metal Exchange has fallen by 16% from $19,500 a ton to $16,393/t largely because a Chinese steel-making company unveiled plans to boost battery-grade nickel production.
More nickel for Musk, but will it be green enough? Photo by Odd Andersen, AFP via Getty Images.
Until a few days ago Musk was lamenting the fact that nickel was overpriced and hitting the cost of his world-beating Tesla EVs and potentially forcing a change to battery chemistry.
“Nickel is our biggest concern for scaling lithium-ion cell production,” Musk said in a Tweet last week.
“That’s why we are shifting standard range cars to an iron cathode. Plenty of iron and lithium.”
Technical Breakthrough
Shortly after that Tweet China’s Tsingshan Holding Group announced that had started producing a battery-grade form of nickel from low-grade saprolite ore, a technical breakthrough which threatens to flood the nickel market.
Until Tsingshan said it would be produce 75,000 tons a year of nickel-in-matte for conversion into nickel sulfate for battery-making customers the primary market for saprolite-sourced nickel was in the production of stainless steel, Tsingshan’s specialty.
Most battery-grade nickel comes from nickel sulphide ores mined in Canada and Australia with a sudden surge in demand from battery makers the major reason why BHP did not sell its nickel division after years of trying to offload the operation.
"Green" nickel preferred for Tesla batteries . Photo by Yichuan Cao/NurPhoto via Getty Images.
Tsingshan’s new process for making battery-grade feedstock effectively killed a mini-boom in nickel caused by rapid growth in EV production.
From a Covid-19 pandemic low of $10,700/t at this time last nickel had rocketed up by 82% triggering concern about a major supply shortfall which UBS, an investment bank, reported last week might have already started.
In a battery raw materials report dated March 4, UBS said there could be a nickel supply deficit of 2.2 million tons by 2030, equivalent to 37% of the market.
Tsingshan’s news, delivered a day after the UBS report, appears to have quashed shortfall concerns with two other banks, Macquarie and Morgan Stanley, warning that nickel now faced a rocky road of rising (not falling) supply.
But whether the Tsingshan process will deliver environmentally acceptable nickel is a question asked by Morgan Stanley.
“Far From Green”
While acknowledging the technical success of the new nickel extraction technology Morgan Stanley noted that the new process “is far from green”.
The bank’s query focusses on the pyrometallurgical (intense heat) nature of the process which is said to require the addition of sulfur and produces significant carbon emissions.
By some estimates, Morgan Stanley said, the carbon emissions are 10-times higher than hydrometallurgical (liquid) processes.
Musk and other EV makers will be keen to learn more about the new Tsingshan battery-grade nickel process because a major EV selling point is that their environmental credentials are superior to those of internal combustion engines.
Morgan Stanley said a high level of pollution in the Tsingshan process was likely to be unpalatable in the U.S. and Europe where car makers are already under pressure to reduce the carbon footprint of EV production.
