Nickel is becoming the next big talking point for the renewable energy sector, especially as the world looks to transition away from fossil fuels. Yet, sourcing this metal is riddled with challenges. Leading mining companies like Nornickel are making aggressive moves to capitalize on this high demand, but the geopolitical climate and market dynamics complicate things significantly.
Russia's Nornickel, for example, is eyeing opportunities to establish a major copper smelting facility in Fangchenggang, China. The proposed plant aims to process raw copper concentrate introduced from Russia, potentially refining up to 500,000 tons annually. This strategic move is seen as Nornickel's attempt to tighten its hold on the Chinese market, which is currently the largest consumer of copper, fueled by surging demand for electric vehicles (EVs) and renewable energy technologies.
But Nornickel is not alone. The wider industry is witnessing what can only be described as a gold rush for nickel and other key minerals, driven largely by the push for cleaner energy sources. Alaska, for example, is positioning itself as a significant player with projects like the 23,000-acre Nikolai deposit being explored by Alaska Energy Metals Corporation, which promises to supply nickel and other valuable metals pertinent for EV batteries.
While the status of nickel is climbing, the associated costs and environmental impacts are becoming focal points of discussions. Nickel’s market is affected by various factors like geopolitical tensions and compliance with the Inflation Reduction Act (IRA) introduced by the U.S. government.
According to the IRA, electric vehicles must use batteries made with at least 40% of their minerals sourced from the U.S. or partner countries, gradually increasing to 100% by 2029. If it seems complex, it’s because it is—this regulation significantly excludes nickel sourced from Indonesia where vast production exists, but is largely controlled by Chinese stakeholders.
Industry experts express concerns over the increasing influence of Chinese companies within the nickel supply chain, especially since metals produced by countries labeled as Foreign Entities of Concern, such as China and Russia, are not qualifying for IRA credits. That effectively cancels out much of the nickel coming from Indonesia, which has been dubbed the world’s largest producer of nickel.
Current dynamics suggest it will be increasingly challenging for automakers and battery manufacturers to secure IRA-compliant nickel. Ford Motor Company and General Motors are currently partnered with Chinese firms for nickel production projects overseas. Initial opinions suggest they might face backlash for aligning too closely with potential foreign adversaries.
But is Nornickel’s move to establish itself within China’s copper scene seen as beneficial? Analysts warn about overcapacity issues crippling domestic smelters. For example, Fangchenggang already hosts major Chinese smelters like the Jinchuan group. With the existing facility’s 600,000-ton capacity, the potential addition of Nornickel’s contribution raises eyebrows.
Grant Sporre, head of metals and mining research at Bloomberg Intelligence, articulated how China’s rapid expansion of copper smelting is causing turbulence. The nation has already seen refined copper output grow by over 5% amid tighter production controls—yet this growth is accompanied by increasing pressure on smelters to cut down production amid fierce competition.
Of course, the need for nickel isn’t going away. Its role is pivotal for rechargeable batteries, especially with the anticipated rise of EVs. According to various sources, the nickel market faces growing pressures from subdued prices, which impair the profitability of currently eligible IRA-compliant nickel production. Companies like BHP and Glencore have found themselves making hard choices to keep operations afloat amid these conditions.
Yet without stable, fairly sourced nickel supplies, the ambitions of many automakers could be hampered as they push for greener alternatives. With the Biden administration expected to tighten regulations around IRA compliance even more, the stakes are increasing.
Analysts are continually pointing toward upcoming projects like Talon Metals’ Tamarack project and extending Eagle Mines, which may become increasingly attractive to companies eager to secure promises of compliance and favorable sourcing. Projects within Canada, Brazil, and Australia are also under the microscope as global demand continues ramping up.
So, where does this leave the future for nickel? It’s clear the renewable energy race is intensifying, but the ethical sourcing of metals such as nickel remains encumbered by complex global dynamics. Nornickel and other mining companies are primed to leap but face hurdles from regulatory frameworks and market conditions.
National ambitions for energy independence—and securing the materials necessary to power this vision—suggest we’re on the brink of significant industry changes. The dilemma of sourcing sufficient nickel without falling afoul of rising political and economic barriers complicates the path to renewables but offers fascinating insights on where the market is heading.
With such various dynamics at play, be it local resistance to newer facilities or the financial viability of extracting nickel under current economic conditions, keeping track of these developments will be key for stakeholders in the renewable energy sector, automakers, and consumers alike.
