Electric vehicles won't depose stainless in nickel demand dynamics

By Zandi Shabalala

LONDON (Reuters) - Investors hoping for explosive nickel demand growth, in tandem with the electric vehicle revolution, could well be disappointed as any increase is seen as unlikely to change a market dominated by stainless steel producers.

Some watching the frenzy of interest in battery materials such as lithium and cobalt say nickel is due its turn in the spotlight given its use in batteries to power EVs, seen as a way of reducing air pollution and meeting emissions targets.

However, the amounts used in these batteries at between 7 and 18 kgs are small; by 2025 nickel usage in these batteries is likely to amount to less than 100,000 tonnes, a fraction of global demand.

That hasn't deterred some from speculating.

Notably, Glencore Chief Executive Ivan Glasenberg said in December demand for nickel could reach 400,000 tonnes should electric vehicles reach 10 percent of the global fleet, enough to cause a supply deficit.

However, out of 89 million cars sold last year roughly one percent or only about 1.1 million were electric or plug-in hybrid vehicles. Consultants expect EV and PHEV sales to rise to more than six million units by 2025, which would amount to around six percent of global car sales.

Translated into nickel demand that could amount to an extra 97,000 tonnes, according to Cairn Energy Research Advisors.

That number chimes with an estimate from consultants Roskill, which sees nickel demand growth from battery producers for EVs to rise between 12.6 and 19.5 percent a year to between 51,000 and 93,000 tonnes by 2025.

"EVs/batteries will become more important for nickel in future, but will not become nickel's dominant use (unlike cobalt or lithium)," said Robert Baylis, managing director of consultancy Roskill.

Roughly two-thirds of global nickel demand, estimated at around two million tonnes this year, is accounted for by stainless steel mills.

Investor interest in lithium due to its importance in EV batteries has, according to data from Shanghai Metals Market, seen the price of lithium metal (SMM-MIN-LTM) double to around 800,000 yuan a tonne since late 2015.

Prices of another key metal used in EV batteries, cobalt (COB-CATH-LON) too have more than doubled to above $20 a lb over the same period.

Nickel prices have risen nearly 40 percent since early 2016, but that was mostly due to stronger demand from Chinese firms opting to make better quality stainless steel and worries about supplies from top producer the Philippines.

(Editing by David Evans)