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Seven years ago we discussed with our client, global Metals & Mining leader, potential opportunities and threats that might emerge from technological trends in metals' applications. One risk we identified related to laterite Ni production in South-East Asia, the risk of Class 1 Ni substitution by laterite Ni. That time the main technology for processing laterites ores, HPAL (High Pressure Acid Leaching) was rather at Proof-of-Concept phase, economics, scalability, environmental issues were still to be explored.
Traditionally, processing Ni laterite deposits was more expensive than sulphide, but China has changed the game. Now, a new generation of HPAL is being used to turn Indonesia's lower-grade Ni ore into metal suitable for xEV batteries. According to AME Research, HPAL uses ore grades as low as 0,9% Ni and it costs to produce a ton of Ni up to half of what it costs to produce a ton of Class 1 Ni from sulphide ore.
However, the dark side remains. HPAL produces approximately double the amount of tailings that need to be treated and stored, raising the risk of severe contamination. It employs sulfuric acid, disposes magnesium sulphate waste. Moreover, despite official bans, certain HPAL plants continue environmentally egregious practice of Deep Sea Tailings (DST), due to the much higher cost of managing the tailings on land.
Despite the environmental costs, Indonesia’s HPAL and matte projects have pushed Ni market into surplus. Indonesia now accounts for more than half of world supply, with the potential to reach three-quarters of all production toward the end of the decade. Chinese companies refining battery-grade nickel from Indonesia have flooded the market, pushing Ni prices down about 50% over the last two years and making about half of all nickel operations unprofitable.
Anglo American recently took $500 million write-down on its Ni business. BHP is considering shutter its flagship Ni business in Australia, $2.5 billion of its Western Australia Ni operations has already been written down. Glencore, one of the world’s biggest producers, is closing its Ni operations on the islands of New Caledonia.
What do you think Nickel market awaits, will we see demand-supply balance and price rebound in the foreseeable future or not?
