Australian nickel producer Western Areas has warned of an upcoming nickel shortage due to a rapidly growing electric vehicle battery market.
"We fully believe that the shortage of clean nickel sulphide for the electric vehicle sector is a looming issue that the market has only recently acknowledged," the company said.
Combined with forecast growth in nickel demand, stockpiles have dramatically reduced and spot nickel prices are now trading at A$7.60/lb ($6.08/lb). Price volatility was likely to remain in the near term, it said.
Western Areas cited research by investment bank UBS indicating that the electric vehicle market will increase nickel demand by 10-40pc by 2025. The research showed that if there were 15mn electric vehicles by then, nickel supply would need to rise by 300,000-900,000 t/yr to meet demand.
Complicating the supply situation is that only 50pc of nickel output would be available to meet electric vehicle demand. It is estimated that each electric vehicle will require around 50kg of nickel, it said.
Nickel is expected to benefit from high pricing and limited availability of cobalt, which is mainly produced in the Democratic Republic of Congo.
Western Areas produced 10,865t of nickel in concentrate in the six months to 31 December and sold 10,614t. Full year production guidance for fiscal 2018 remains at 23,000-25,000t of nickel in ore and 21,500-22,500t of nickel in concentrate. Cash costs for the year are expected to average A$2.49/lb ($1.94/lb).
Offtake agreements are in place for all output with diversified resources group BHP and Chinese group Tsingshan.
The company's Mill Enhancement Recovery Project is expected to be completed by the end of March and a definitive feasibility study on the Odysseus project is expected to be completed by July.
Fiscal first half profit rose to A$3.5mn from A$516,000 a year earlier.
Three-month nickel on London-based metal exchange LME traded at $13,670/t on 19 February, up from $13,005/t on 12 February.
