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By Kyle Anthony
Factors like high interest rates and a manufacturing recession in many Western economies had analysts less than optimistic about the prospects of most base metals going into 2024. However, the consensus is that nickel would be one of the standout metals, along with copper, probably boasting the strongest demand profile. A new report from Sprott sheds more light on whats driving this demand. We explore findings from the report and more below.
Whats Driving The Rising Demand For Nickel?
Base metals, particularly nickel, are essential to our modern economy and hold significance in supporting sustained economic growth. Nickels versatility is evident in numerous use cases, and most nickel demand historically has been for stainless steel. However, two key trends within todays economy, clean energy and electrification, have further driven nickel demand in recent years impacting the demand mix and are projected to continue doing so in the years to come.
The demand for nickel and other base metals is expected to grow exponentially in the current decade due to the mass adoption of electric vehicles (EVs) and the proliferation of clean technologies, both of which use a variety of base metals and alloys such as nickel for batteries. Data cited in the report from Sprott indicates that U.S. EV sales broke through the one million mark in 2023, an increase of 52% from the previous year. Globally, EV sales were 3.5 million higher in 2023 than in 2022, representing a 35% year-over-year increase, with sales in emerging markets also rising. Furthermore, half of all cars sold globally are expected to be electric by 2035.
As reported in the 2024 International Energy Agency (IEA) Global EV Outlook, the shift to a clean energy system is set to drive a huge increase in the requirements for metals, leading the energy sector to become a major stakeholder in their procurement. In a scenario that meets the Paris Agreement goals, the IEA forecasts that the demand for metals will rise significantly over the next two decades, with total demand increasing by 60-70% for nickel and cobalt. Electric vehicles and battery storage have already displaced consumer electronics to become the largest consumer of lithium and are set to take over from stainless steel as the largest end-user of nickel by 2040.
Simply put, as society moves towards carbon neutrality, the demand for nickel will continue to grow. This expected growth will ultimately result in elevated pricing for these commodities as newer use cases add to the demand for traditional/pre-existing use cases
The Battery Advantages Offered By Nickel
According to the Nickel Institute, the major advantage of using nickel in batteries is that it helps deliver higher energy density and greater storage capacity at a lower cost. Further advances in nickel-containing battery technology mean it is set for an increasing role in energy storage systems, helping make the cost of each kilowatt-hour (kWh) of battery storage more competitive.
Ultimately, this will allow energy derived from sustainable but intermittent sources such as solar and wind to be captured and stored more efficiently. Sprotts report also highlights that nickel batteries help increase the driving range of cars and that nickel is lighter with a smaller footprint than metals used in other battery chemistries. All of these advantages serve to create a case for the increasing use of nickel in batteries reflected in demand forecasts for the metal.
Usage Of Nickel In The Global Energy Transition Beyond EVs
Beyond EV batteries, nickel usage across the clean energy spectrum is broad. As detailed in the Sprott report, nickel can be used as a catalyst for producing hydrogen, which is seen as a clean energy carrier with potential applications in transportation and industry. Nickel alloys are also a key component for nuclear power plants' heat transfer and cooling systems and inside nuclear reactor vessels. Additionally, high-strength nickel alloys can be used in wind turbine blades to make them lighter, more durable, larger and more efficient.
The versatility of nickel and its applicability across various clean energy projects make it especially valuable. As nations introduce stricter emission mandates, companies and governments will likely need large amounts of nickel to reach net-zero emissions targets. Evidence of this has already begun, with Australia having listed nickel as a critical mineral and several European car makers already establishing EV plants in Indonesia the worlds largest nickel producer, accounting for half of the global nickel supply, with some estimates predicting that the country will produce more than 75% of global supply during the 20222029 period.
Sprott Nickel Miners ETF
As the world moves toward electrification, a myriad of technological innovations will undoubtedly be brought to market, but they all will require the necessary battery metals for them to be viable. The Sprott Nickel Miners ETF (NASDAQ: NIKL) aims to capitalize on the growing demand for nickel and the integral part it will play in the transition to a carbon-neutral society.
Sprotts special report highlights that as electric vehicles and energy storage technologies become mainstays in our global economy, the companies that reflect the value of battery materials will represent real economic value and be a source of wealth-building for investors. Thus, the electrification movement is not only about energy advancement but also an opportunity for wealth generation within an ecosystem focused on sustainability.
Featured photo by CHUTTERSNAP on Unsplash.
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