Nickel sulphate supply to peak in 2027 as EV sector-driven demand accelerates

Nickel in sulphate production is expected to rise from 211 kilo-tonnes (Kt) in 2019 to its peak at 450 Kt in 2027, while demand driven by the electric vehicle (EV) sector continues to accelerate, reaching approximately 800 Kt by 2035, says Wood Mackenzie.

Historically, nickel sulphate is used in solution as the electrolyte in nickel plating, with other minor applications, such as in the manufacture of catalysts. More recently, it has become increasingly important as a feed chemical in the production of battery cathode materials, particularly in lithium-ion batteries for EVs.

Wood Mackenzie research director Andrew Mitchell said: “Existing and would-be nickel producers are being drawn to the possibility of manufacturing sulphate to benefit from perceived premiums payable on nickel sulphate sales. While premiums have long been recognised in the plating sector, it is less clear in the EV battery space. The only visibility on pricing is Chinese selling prices.”

Between 2018 and the first half of 2019, nickel sulphate in China sold at a premium to the nickel price on the Shanghai Futures Exchange (SHFE), but the situation reversed in July 2019 and through to the end of December, to a discount of up to 10%. The move to a discount corresponds to a period where the Chinese government removed subsidies on EV sales as well as a jump in nickel price. In effect, sulphate consumers could not afford any premium and demand was impaired.

Still, Wood Mackenzie expects the nickel sulphate market to move into surplus this year, and potentially remain oversupplied through to at least 2025. The main reason for the oversupply is the additional material to be generated by three high-pressure acid leach plants currently under construction by Chinese groups in Indonesia. The combined capacity of these plants is 160 Kt of contained nickel, all of which is destined to produce nickel sulphate.

Mitchell said: “A price premium is necessary to cover the additional processing costs to produce the sulphate. So, while higher prices for nickel sulphate over SHFE nickel prices can prevail, these may not result in increased margins for the producer. According to our data, net of feed purchase costs, the cost of producing nickel sulphate from mixed hydroxide precipitate has averaged US$3,500 per tonne Ni (US$1.60 per pound).

“Clearly there is no guarantee that high premiums now equate to similarly high premiums in the future. That said, as the demand for nickel sulphate from the battery sector is expected to accelerate, it is feasible that premiums will be available in the years ahead.”

This is perhaps particularly so given the shift to higher-nickel battery chemistries which necessitates higher-purity nickel sulphate. Achieving these higher purities will require investment and the additional costs would need to be passed on to the market and reflected in the pricing of the premium material.

In the longer term, additional nickel sulphate production is needed to meet the forecast growth in demand, particularly from the EV sector. Around 500 Kt of additional nickel in sulphate will be required over the eight-year period from 2028 to 2035.

Mitchell said: “Clearly, meeting this rising demand will be a challenge for the industry, but it does provide opportunities for those with nickel projects waiting in the wings to press ahead with development, if funding can be secured.”