Rapid demand growth for nickel sulphate and increased availability of feedstocks are causing the type of nickel required by the Chinese market to evolve.

The global move to electrify transport has resulted in automotive companies pursuing aggressive electric vehicle (EV) rollouts. Lithium-iron-phosphate (LFP) batteries have been quickly gaining market share in lower-cost, mass-market EV models, however, nickel-rich chemistries (including NCA and NCM), are expected to dominate higher-end, luxury EVs. As such, nickel is expected to experience substantial growth for use in EV batteries over the coming decade.

China has quickly asserted its dominance across EV battery raw material supply chains and for nickel sulphate, capacity has been quickly built up to feed the rising demand for cathode active materials production. Given China’s comparative lack of domestic nickel resources, it is a very significant importer of nickel feedstocks for use in its nickel sulphate production. The availability of battery-grade nickel feedstocks, suitable for onward refining to nickel sulphate, was long considered the major pinch point in the nickel EV battery supply chain. However, recent events in a volatile nickel market have changed this narrative. Given the variety of feedstocks that can be used in its production, Project Blue categorises nickel sulphate based on three key routes:

1.    Nickel sulphate from intermediates including nickel matte, mixed hydroxide precipitate (MHP) and crude nickel sulphate

2.    Nickel sulphate via Class I dissolution

3.    Nickel sulphate from recycled feedstocks

In 2020, Chinese EV battery demand grew steadily, defying the worst of the demand impacts that the pandemic reeked on other end-use sectors. At the time, China’s imports of Class I refined nickel and MHP were almost identical standing at a combined 265kt Ni. However, it is worth noting that a little under half of this metal was used in the production of nickel sulphate with units also destined for the stainless steel industry and other users of nickel reliant on high-purity material. MHP was imported from the usual sources including the Goro operation in New Caledonia, Ramu in PNG and Ravensthorpe in Australia.

Rapidly increasing domestic demand for EVs in 2021, combined with limited new intermediate availability, meant that Chinese third-party producers of nickel sulphate were caught short of feedstock. In response, there was a massive increase in demand for Class I material with imports doubling over the space of a year. Project Blue estimates that Chinese nickel sulphate, produced via dissolved powder/briquettes, increased to 140kt Ni-in-sulphate during 2021 and this helped to alleviate the intermediates shortage.

This trend was short-lived though. Persistently high prices for Class I nickel in 2022 meant that the dissolution route was less economical for producers purchasing on the spot market. At the same time, three of the long-anticipated Indonesian high-pressure acid leach (HPAL) plants, largely developed by Chinese players (and delayed by the outbreak of the pandemic), were commissioned and quickly ramped up. In response to this increased intermediate availability, China’s imports of MHP rose by a staggering 115% y-on-y in 2022. China also increased imports of nickel matte tenfold from Indonesia in 2022, much of this based on Tsingshan’s NPI-matte conversion to supply Huayou and CNGR.

During early 2023, China’s monthly imports of Class I nickel slumped further with April shipments totalling 3.2kt, the lowest since January 2004. This was in part explained by an absence of Russian nickel cathode, while Chinese buyers looked to conclude prolonged contract negotiations with Nornickel. It also reflects a wider trend in the market with increased competition for Class I material for nickel sulphate feedstock outside of China, particularly in nations not invested in the Indonesian nickel boom. Although China’s MHP imports dropped in April and May, owing to an oversupply of ternary cathode material in the Chinese market, the commissioning of PT Huafei in Indonesia in June (120ktpy Ni-in-MHP over multiple phases) will result in a huge volume of additional intermediate material entering the Chinese battery market.

Looking forward, given our expectations for Indonesian intermediate nickel supply from Chinese investment, much of China’s future nickel sulphate production will come from Indonesian-origin material. At the same time, the country’s requirement for Class I nickel will likely remain low, stabilising at a “critical” level – that is, the minimum amount required for sectors that are dependent on high-purity nickel, including the stainless steel industry for melt chemistry balancing purposes.