Nickel is not part of my life. Or so I thought. I recently spotted that nickel is essential to hypodermic needles, as per those used administering Covid-19 vaccinations. I wondered what else the metal is used for.
Nickel is fantastic at strengthening metal alloys. That makes it a big part of my life. It is present in everything from guitar strings and dental implants to coins and mobile phones. Some two-thirds of it goes into stainless steel.
For now, let’s look beyond these established uses. They have well-known investment cases.
Nickel as a component of the lithium-ion batteries that power electric vehicles (EVs) sparks my imagination.
First, nickel is part of the efficiency conundrum still holding back EV uptake. A higher ratio of nickel (relative to other ingredients like cobalt and manganese) adds energy density and storage at lower cost. This means, above all, more range per charge.
The political story for EVs is also positive. British Prime Minister Boris Johnson announced earlier in 2021 his policy to end sales of new combustion-engine cars and vans by 2030. And in the US, President Joe Biden is pushing for $174 billion of pro-EV spending, including installation of charging stations and tax incentives for EV buyers – although Republicans have countered with an offer to support just $4 billion of this.
In the private sector, General Motors and Volkswagen are targeting 2035 to sell only battery-powered vehicles.
In 2020, despite the pandemic, a record three million new EVs were registered globally. That is a 41% bump from 2019.
Tesla boss Elon Musk translated this demand into relevance for nickel with a comment in a July 2020 earnings call. Asked about the biggest hinderance to EV growth, the mercurial Musk said Tesla would give a “giant contract for a long period of time” to any company that could produce nickel “efficiently and in an environmentally sensitive way”.
Musk’s latter criterion is an important warning. Mining nickel creates substantial environmental pressures. This requires that nickel-bugs monitor related green technologies and signals of government regulation.
BHP sells three-quarters of the nickel it mines to battery manufacturers. Its Western Australia operations cover exploration, mining, smelting and refining for a complete mine-to-market package. Once its delayed nickel refinery at Kwinana is up and running (now set for the second half of 2021), it will produce 100kt of nickel sulphate (the high-grade form used in EV batteries) per year, making it the largest project of its kind in the world.
A deal to source half of its electricity for the Kwinana facility from solar speaks to the environmental element of Musk’s offer.
Johnson Matthey’s angle on EVs lies in the scientific corner, making the nickel-enriched battery materials that are critical to commercialisation of these cars. I am monitoring its ability to ramp up this portion of its much larger business.
Johnson Matthey committed earlier this year to net-zero emissions by 2040.
The marker I am using to anchor my thinking on a potential injection of nickel to my portfolio via UK shares is “$100kWh”. That is reckoned to be the US dollar price per kilowatt hour where EV battery packs can compete with petrol and diesel engines.