As the global clean energy transition continues onward at breakneck speed, countries with battery metal reserves look to corner the rising market. Chile may take the cake for largest lithium supplier, but Indonesia is leading the race in the supply of nickel, a key metal in electric vehicle (EV) batteries. Now the Southeast Asian country is looking to become a top participant in the global EV market.
In fact, nickel companies are driving a record year for public listings in Indonesia with bankers anticipating up to $4 billion in issuance in 2023.1 Indonesia is already Asia’s second-busiest IPO market this year, in terms of both deal value and number of listings, after China. Bankers anticipate up to $4 billion in issuance in 2023.2
President Joko Widodo has prohibited the export of raw nickel to encourage more battery manufacturers to build domestic processing plants. The practice, known as downstreaming, has contributed to an increase in the value of the country's nickel product exports to almost $30 billion in 2022, more than 10 times what they were a decade ago.3
As a result, a whole supply chain for EVs is growing. LG Energy Solution is constructing a $1.1 billion battery cell plant, while Hyundai launched its first Southeast Asian plant to assemble EVs last year. China’s CATL has also invested in the industry and the government is courting Tesla and BYD.
In the last three years alone Indonesia has signed over a dozen deals worth over $15 billion for battery materials and EV production with global manufacturers like LG, Hyundai, and Foxconn.
Now, the public listings of nickel companies couldl put international investor interest in Widodo's agenda to the test, despite the fact that Indonesia is still viewed as a weak emerging market with volatile shares.
Regardless of whether nickel supply comes from Indonesia or other countries, demand is expected to continue rising. Brazilian mining giant Vale sees global demand increasing by 44% by 2030,4 while BHP predicts it will rise fourfold by 2050 due to EV demand.5
The Oregon Group Predicts a 5-year Supply Crunch for Battery Nickel
According to a new report, the availability of Class I nickel, which is required for EV batteries, is projected to be limited for the next three to five years. Despite increased output by Chinese nickel giant Tsingshan, The Oregon Group believes that the nickel market will remain constrained.
The Oregon Group is widely seen as an expert in the financial industry. This investment firm was started by Anthony Milewski and Justin Cochrane, who are both independent experts in the capital markets.
Milewski has been a consultant, a founder, and an investor in the mining business.
Milewski and The Oregon Group think that a lot of money should be put into projects all over the world that use nickel.
The report, called The Green Economy and Nickel's Generational Class I Supply Crunch, investigates major trends influencing the expansion of Class I nickel supply and demand. Geopolitical concerns, as well as the impending collision between the drive to decarbonize supply chains and the high emissions of new and near-term nickel production, are among them.
Here are some of the most important things the report talks about:
The battery business is growing so fast that everyone is looking at Class I nickel supplies. Forecasts from analysts vary, but most agree that growth will be exponential. Wood Mackenzie says that batteries used 7% of all nickel in 2021, but that number will rise to 40% by 2040. This will cause the worldwide demand for nickel to double. This projection, on the other hand, doesn't take into account the problems that come up when Class II nickel is refined into Class I nickel. In other words, there is still a Class I nickel supply bottleneck on the market. The only questions are how bad it is and how long it will last.
China was the leader in the supply chains for battery metals and rare earths for many years, but it didn't have much competition. State-backed businesses could invest, work together, and form partnerships as they saw fit to get the resources they needed while preventing competitors from doing the same. The West is finally waking up at the last minute. As it does this, investment opportunities that were once just a guess are beginning to take shape.
Carbon border taxes, growing consumer dissatisfaction with products made from "bad" metals, and other things seem to be making it so that Chinese-controlled nickel is losing some of its price advantages. But for that to make a difference, the West needs new sources of supply that meet certain requirements. The good news is... It has huge untapped resources right in its own backyard. There's just one problem. Around 60% of the nickel that is made today is in the form of ferronickel, which is nickel that contains between 2% and 75% iron and can't be used directly in batteries because it is too expensive and bad for the environment. Simple froth flotation, which has been used in mining for more than 100 years, is a faster, easier, and cleaner way to process sulfide ores of any grade.
The Oregon Group argues that ignoring sulfide resources that are thought to be "poor grade" may soon no longer be possible in a world that wants battery-grade nickel products but doesn't have many places to get them. This is because the demand for battery-grade nickel is expected to grow exponentially in the long run, but there aren't many places to get it now.
This report gives a detailed look at the nickel market, the major trends that will affect it over the next ten years, and how the supply and demand of nickel will change. It also has a full list of companies that look for and develop nickel as well as a few nickel ETFs.
The Class I nickel deficit won't go away any time soon, so prices will continue to go up for a while. Now is a good time to think about getting into the nickel market if you haven't already.
Click here to read The Oregon Group's full report The Green Economy and Nickel's Generational Class I Supply Crunch.
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