BHP will supply nickel for Tesla’s electric vehicles.

Industry leaders predict critical minerals for battery technologies will lead to significant opportunities for the nation’s growing resources sector.

Australia is expected to be at the forefront of the electric vehicle (EV) boom with key industry figures signalling that a combination of critical minerals for battery production and increased demand for the vehicles will create an enormous opportunity.

BHP Market Analysis Economics vice president Huw McKay, in the company’s first-half economic and commodity outlook, says EVs are expected to constitute around 17 per cent of the light duty vehicle fleet by 2035 and around 41 per cent of annual sales.

“While the collapse in auto sales activity under COVID–19 (from already low levels) also hit EVs, they bounced back hard in the second half of calendar 2020,” McKay says. 

“Annual sales passed three million units for the first time, representing 37 per cent growth year on year.

“The 17 per cent fleet share we now project in 2035 translates to 314 million EVs on the road, versus 275 million previously.”

Tesla chair Robyn Denholm, speaking at the Mineral Council Australia’s minerals week event in June, explains that each EV has around $5000 worth of minerals, with Australia capable of supplying almost all of it.

“Australia is the only country in the world with resources in all three of the critical battery metals, as well as other minerals required for the clean energy transition,” Denholm says.

“By 2030, the value of the global lithium-ion battery market is forecast to be $400 billion. That’s eight times the revenue generated by Australia’s coal exports in 2020.”

Federal Minister for Industry, Science and Technology Christian Porter says Australia is well placed to capitalise on growing global demand for battery systems and the critical minerals associated with their production, with the energy storage market expected to be worth almost US$20 billion ($27.2 billion) by 2027.

“Australia’s resource sector is world-class. Through our $1.3 billion Modern Manufacturing Initiative, we are helping to unlock this enormous potential by providing targeted support for projects that will deliver big rewards for our local economy in terms of export earnings and new job opportunities,” Porter says.

“It is also critical that we build our sovereign capability in this sector, with China currently the world leader in critical minerals processing including battery production.

“Whether it’s building large-scale battery systems, adding value to critical minerals exports through new refining techniques, or driving the adoption of battery power in mining vehicles, these projects will increase Australia’s international competitiveness and help position us a future leader in this crucial sector.”

Australia’s nickel production will be a crucial part of this supply chain and price forecasts are already starting to reflect the metals promising future.

In its June nickel price revision, Fitch Solutions predicts the 2021 average price forecast for nickel will rise from US$15,750 per tonne to US$16,500 per tonne.

According to its Nickel Prices – Upwards Revision Amid Strong Demand report, Fitch Solutions expects nickel prices will trade lower than present levels in the coming months, as demand from steel production stabilises and nickel metal production ramps up. 

Prices (at the time of writing) have recovered from a steep price correction in March which occurred after an announcement that Chinese stainless-steel producer Tsingshan plans to bridge the NPI to battery-grade nickel divide by the end of 2021 and substantially increase nickel production for both 2022 and 2023. 

Subsequently, nickel prices fell to US$16,450 per tonne. In May, prices reached a four-week low in response to Chinese regulators warning domestic commodities firms to keep the market fair after base metals experienced a strong rally. 

Prior to the Tsingshan announcement, nickel prices had progressed to multi-year highs on the back of increased optimism in the market, a weakening dollar and expectations about future nickel supply deficits. 

Fitch Solutions also predicts that the EV market will be a source of growing demand as the use of nickel in lithium-ion battery compositions increase. 

“China will once again be a key source of demand in this respect, particularly as manufacturers begin to use higher nickel content batteries in their EVs,” Fitch Solutions states. 

“We expect this trend to begin taking hold over the coming years as consumers favour EVs with longer driving distance capabilities before recharging, making nickel-based battery compositions the optimal choice for vehicle producers.” 

According to Denholm, Australia has a competitive opportunity to enhance its environmental, social and governance (ESG) practices for the future as the global market for electric vehicles grows.

“Tesla is the world’s largest manufacturer of electric vehicles and battery storage systems,” Denholm says.

“At the heart of everything we do in our quest to accelerate the transition to sustainable energy is the lithium-ion battery – one of the most important technologies of the century.

“There is a global transition to sustainable energy underway and this presents a huge opportunity for Australia.”

In July, BHP agreed to supply Tesla with nickel from its Nickel West assets in Western Australia in a collaboration which will aim to make the battery supply chain more sustainable.

Western Australian Mines and Petroleum Minister Bill Johnston says the agreement highlights that the state hosts the best quality raw materials integral to the world’s decarbonisation efforts. 

“It also reinforces the level of comfort global brands have in investing in the state knowing that raw materials are responsibly sourced,” Johnston says.

“As investors and the community are increasingly holding mining companies to the highest ESG standards and practices, the supply agreement between BHP and Tesla reflects the regulatory framework in place in Western Australia that ensures the sustainable production of battery materials.”

Denholm believes Australia should prioritise onshore refining of its lithium to save costs and reduce emissions.

“There’s another reason for Australia to prioritise onshore refining; it’s a huge economic opportunity,” she says.

“Tesla estimates that last year, Australia supplied approximately 49 per cent of the world’s lithium ore – spodumene – but zero per cent of the refined product suitable for battery cells. That lithium sold for about $US100 million – but if it was processed onshore in Australia the value would have been more like $US1.7 billion.

“So that’s a $US1.6 billion annual opportunity and growing.” 

This story also appears in the August issue of Australian Resources & Investment.