SMM Indonesia Nickel and Cobalt Industry Chain Conference: Global Nickel & Cobalt Supply and Demand Prospect, Impact from NEV Development

At the SMM Indonesia Nickel and Cobalt Industry Chain Conference 2023 hosted by SMM in Jakarta, Indonesia, Shirley Wang, GM of SMM New Energy Research Department shared her view on the forecast of supply and demand of the global nickel-cobalt market.

Vehicle manufactures are concerning about their raw materials, Elon Musk has ever said, “Please mine more nickel, Tesla will give you a giant contract for a long period of time if you mine nickel efficiently and in an environmentally sensitive way…”

Equally or more important thing is that the Upstream demand is determined by NEV' sales.

Global nickel & cobalt supply and demand outlook：Influence from the development of NEV

NEV manufacturing has skied a rocket benefiting from peak and neutralization of carbon emission.

New energy vehicles in the Chinese market grow by over 100% in 2021 and about 100% in 2022. In 2023, affected by the decline of subsidy policies and macro environment, it is expected that the growth of new energy vehicles in China will decline to less than 30%.

The NEV penetration rate in China is expected to increase rapidly from 14% in 2021 to 26% in 2022. The penetration rate is expected to slow down to 31% in 2023. 45% in 2026.

The market outside China are mainly in Europe and America. Penetration is estimate to grow from 10% in 2023 to 22% in 2026.

From the perspective of driving factors, the policy-driven penetration of the Chinese market accelerated before 2022, and the decline of subsidies and macro environmental factors slowed down the penetration growth from 2023.

Higher ternary battery ratio brings better ternary demand as well as nickel.

Before 2021, the proportion of 5 series and 6 series will be the highest. Starting in 2022, the price of lithium salt increases and the demand for high energy density increases. The proportion of high-nickel ternary precursors, including 8 series and 9 series, continues to increase. According to SMM data, high nickel ternary ratio is 45%, include 8&9serials.the number will increase to 68% in 2026 benefit from energy density requirements.

In terms of volume, affected by the epidemic in 2020, the output of precursor will be around 300,000 tons. In 2021-2022, with the rapid increase of demand, the output of precursor will rapidly increase to more than 800,000 tons. SMM estimates that the output of precursor will exceed 1.6 million tons in 2026.

Nickel demand has grown from around 1.6 million tons in 2019 to nearly 3 million tons projected for 2026. Among them, the light blue column is the change of demand for nickel from the panel plate (mainly the ternary precursor). It is the fastest growing and most obvious sector of all demand. From 126kt in 2019 to over 900kt in 2026. The proportion of battery increased from 10% in 2019 to 22% in 2022, and is expected to increase to 37% in 2026.

Evolution trend of nickel structural supply under the prosperous development of NEV

High-nickel content ternary would be the mainstream tech route globally.

The increase of high nickel proportion directly brings the increase of nickel demand.

SMM calculated the weighted nickel consumption per ton of precursors according to the proportion of different precursors multiplied with the average nickel consumption per ton.

Weighted nickel consumption of the Chinese precursor continues to increase. It will gradually increase from 0.4 in 2021 to nearly 0.5 Ni ton in 2025.

Key regions for nickel sulfate supply

The global supply is expected to have an annual growth rate of 20% in the coming years. China remains the

largest producer with 90% production proportion by 2027.

Nickel sulfate, the direct raw material of nickel in the precursor, also follows the trend of increasing unit consumption of the precursor, slowing down the growth of vehicle penetration rate.

Global nickel sulfate supply is increasing as well. From 2017 to 2023, the global total grew by 30% on an annualized basis. Growth slows to an annualized 20% in 2023-2027.

As to the key regions, China is the world's largest producer of nickel sulfate, accounting for 66% of output in 2017. (The production from China will) Increase to 78 % in 2023 and is expected to increase to 85% by 2026.

The output increase to more than 1million.

Beside China, Indonesia will be the second largest overseas producer of nickel sulfate production growth. From zero production in 2017 to around 60,000 nickel tons in 2027.

Growth in Finland is except to slow down significantly over the next few years. Japan and South Korea had a lot of growth before 2023, but is except to slow down in the next few year.

Nickel sulfate industry in China is suffering deficit

The capacity in China are suffering losses, due to the shortage in raw material supply, if we observe the cost breakdown of each tech with different feedstock, basically raw material account for over 80% of total production cost, so it is quite important.

The capacity in China almost are suffering losses, due to the shortage in raw material supply, if we observe the cost breakdown of each tech with different feedstock, basically raw material account for over 80% of total production cost, so it is quite important.

We expect production cost with MHP and matte would be getting lower if scalable production of matte or MHP project in Indonesia happened as scheduled

Global market forecast and distribution of nickel sulfate supply

From the perspective of the proportion of raw materials in global nickel sulfate, MHP is still the main raw material from 2022 to 2027. However, the proportion of high nickel matte is expected to continue to increase, from 15% in 2022 to 29% in 2027. And the proportion of nickel briquette will be significantly reduced.

In terms of the proportion of raw materials in major producing countries, nickel briquette use in China continues to decline and is expected to fall to an extremely low level by 2027. This has directly led to a decline in the proportion of nickel briquette used worldwide.

nickel briquette is still competitive in some countries ,Affected by the American IRA Act, some overseas enterprises (such as South Korea) still have doubts about choosing raw materials from Chinese-funded Indonesian production projects and are more cautious about their choices;

Due to production line restrictions, the dissolution of nickel briquette to produce nickel sulfate has differences from other production lines, and capacity conversion requires the construction of new production lines.

But the production increment is limited. Tasla had ever talked to Glencore, Australia’s BHP and Brazil’s Vale. But these companies had few plans to expand nickel output just for Tasla.

Basically, MHP has advantage of lower carbon emissions, mature technology, and matte has the advantage of lower CAPEX, higher construction efficient as well as lower waste disposal. MHP and high nickel matte gradually occupy the mainstream as raw materials.

Global supply analysis of nickel intermediate products

Starting from 2021, the supply of nickel intermediate products has rapidly expanded due to downstream

demand, with both pyrometallurgical and hydrometallurgical projects progressing. It is expected that the

total production will reach 1.64 million tons of nickel by 2027.

Nickel intermediates supply forecast for Indonesia

Much of the global growth in raw materials is coming from Indonesia, where the proportion of intermediate goods produced continues to increase. The proportion of supply is expected to exceed 85% in 2027, and MHP and high ice nickel will both increase significantly.

In terms of details, a number of projects are planned to be put into operation from 2023 to 2025. According to the statistics disclosed by enterprises, the details of production can be referred to the table. Some projects may have minor changes in actual production.

Global distribution of major nickel ore supply

In 2021, the global nickel mining capacity reached a total of 3.01 million metric tons of metal.

In terms of distribution regions, nickel resources are mainly concentrated in the eastern part of Asia, with laterite nickel ore as the main type.

Sulfide nickel ore is found in Canada, China, Russia, and Australia.

As for country-specific resources, Indonesia boasts the largest share of global nickel resources, accounting for 43% of the world‘s total. It’s the only country with the Annual capacity more than 1 million.

Global nickel ore can be divided into two categories, namely laterite nickel ore and nickel sulfide ore, laterite nickel ore accounts for about 70% of the global proportion, and nickel sulfide ore accounts for about 30%. Sulfide ore is mainly distributed in Canada, Russia, China and Australia, while laterite nickel ore is mainly concentrated in tropical countries such as the Philippines, Indonesia, New Caledonia and other equatorial countries. By dividing the annual nickel production capacity of each country into three steps: less than 100,000 mt with metal content, 100,000 to 500,000 mt with metal content and more than 1 million mt with metal content, we can find that only Indonesia produces more than 1 million mt with metal content, followed by the Philippines. Indonesia alone accounts for 43% of the world's nickel resources, ranking first in the world, so Indonesia plays a pivotal role in the global nickel industry.

Evolution trend of cobalt structural supply under the prosperous development of NEV

Nickel unit consumption increase means the cobalt demand decreasing. Weighted unit consumption is expected to decrease from 0.08 ton in 2021 to less than 0.06 ton per ton of PCAM in 2026.

At the same time, cobalt price was too high in the past years, in order to reduce costs, the cobalt content in the medium nickel ternary has also fallen.

Cobalt raw material supply

Cobalt resources are relatively concentrated. DRC and Indonesian MHP being major sources of feedstock supply in the future. The total global supply of cobalt raw materials in 2022 is 210,000 tons of metal, of which the total supply of primary materials is about 160,000 tons, mainly concentrated in the DRC, Australia, Indonesia, Canada and other regions.

In addition, the supply of MHP in Indonesia and lithium battery recycling will gradually increase in the next few years.

Analysis of global supply and demand of cobalt resources

CMOC is except to contribute 24-30k tons of cobalt increment. And cmoc Become the largest supplier of cobalt raw materials in 2023.

Global cobalt sulfate supply is increasing as well. From 2017 to 2023, the global total grew by 11% on an annualized basis. Growth slows to an annualized 9% in 2023-2027.

Summary

The change of terminal demand determines the upstream industrial layout and demand. 

China's new energy vehicle market is expected to experience a slowdown in growth after 2023, with the compound annual growth rate for 2022-2026 estimated about 25%. This is due to the withdrawal of subsidies and macro-environmental factors, which had previously driven the rapid penetration of the market before 2022.

Ternary batteries have seen a decrease in usage proportion in 2022 due to their high cost. However, with the cost expected to decrease in the future, there is still potential for improvement in market proportion.

The demand for nickel has been boosted by the ongoing high nickel trend and synchronization, while the trend of low cobalt has limited the growth of cobalt demand.

Nickel sulfate's main raw materials, MHP and high nickel matte, are seeing a surge in production. This is to ensure the stability of the nickel supply chain, with most of the increase coming from Indonesia.

Additionally, the low cobalt trend is accompanied by a growing cobalt raw material supply, with DRC and Indonesian MHP being major sources of feedstock supply in the future.