Table Of ContentNickel
An industry on the brink of expansion
Nnamdi Anyadike
WOODHEAD PUBLISHING LIMITED
Cambridge England
Published by Woodhead Publishing Limited, Abington Hall, Abington
Cambridge CB1 6AH, England
www.woodhead-publishing.com
First published 2002, Woodhead Publishing Ltd
© 2002, Woodhead Publishing Ltd
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Executive summary
By mid-2001, the nickel market had witnessed a three-year roller-coaster ride of near-record dips and
highs that had seen it advance from an 11-year low of $4000 per tonne at the end of 1998 to near
double that figure in 1999, increasing further to just under $10000 per tonne in 2000, before falling
back to $6500 per tonne in mid-2001.
The indications are that by 2002 there should be an upswing in demand as industrial activity starts to
pick up again. However, on the supply side, there is as yet little clarity on how much output will be
realised from the 'mega' projects that were announced at the end of the 1990s.
Approximately 80% of Western World primary nickel is used in austenitic stainless steel production
and as an alloy with other metals. On average, austenitic stainless steels contain some 8 to 10%
nickel.
SUPPLY OUTLOOK
In 2000, the supply of nickel in the Western World increased by an estimated 35 000 tonnes to 989 000
tonnes. The main reason for this increase was a rise in primary nickel production in the Western
World of approximately 53 000 tonnes and reflected the return to more normal levels of production
by several producers who either had experienced unexpected disruptions or reduced output in 1999.
Partially offsetting the rise in Western World production in 2000 was a decline in net trade with the
former Eastern Bloc countries of approximately 17000 tonnes.
Nickel inventories on the London Metal Exchange (LME) decreased significantly in 2000 to 9678
tonnes by the end of the year, compared with 46 962 tonnes at the end of 1999 and 65 964 tonnes at
the end of 1998. By 16 March 2001, LME nickel inventories had declined to 8682 tonnes.
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EXECUTIVE SUMMARY
Beyond 2001, nickel consumption and nickel prices could well be adversely affected by a number of
factors, including:
• The development of new nickel capacity and new processing technologies, which have made, and
are expected to continue to make, the development of relatively low-grade lateritic nickel deposits
economically attractive
• Decreases in the general level of business activity in the industrial economies, which, in turn, could
lead to a future reduction in stainless steel production compared with 2000 production levels
• Levels of nickel-containing stainless steel scrap and other sources of secondary nickel, and
increased environmental restrictions affecting the use of nickel
• Recommissioning of currently shutdown nickel capacity and, longer term
• Increased use of substitutes for nickel-containing materials.
In addition, the future levels of production and consumption of nickel in Russia are expected to
continue to have significant, but unpredictable, effects on world nickel prices.
Pressure acid leaching (PAL) technology
A new technology, pressure acid leaching (PAL), is a hydrometallurgical process that is potentially
more economical and effective and allows for the production of nickel metal rather than
concentrates.
PAL technology has been used for decades in Cuba but has yet to be demonstrated to be
commercially successful in the new generation of nickel projects. But if the technology does prove to
be successful, the implications for existing high-cost nickel producers are ominous. Some analysts
estimate that the total potential additional nickel supply could be of the order of 0.8 million tonnes
(mt) per year within the next 10 years. The most advanced of the PAL projects is Murrin Murrin in
Western Australia, which came into production early in 1999 at an initial rate of 45000 tonnes per
year.
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EXECUTIVE SUMMARY
Some key mining projects
Manitoba
The Thompson Nickel Belt in northern Manitoba discovered by Inco in 1956 is now a world-class
nickel operation, producing some 100 million pounds of the metal each year. Development of the 1-D
orebody at Manitoba continued in 2001, and Inco expects production to reach approximately 18 600
tonnes by 2004. A second project in Manitoba, the deepening of Birchtree Mine, has been deferred as
part of the company's operational restructurings.
Voisey's Bay
If this project gets under way, and by mid-2001 there was still some question mark hanging over its
future, its development will have a major impact on nickel supply in coming years. Proven reserves
are of 32 mt, grading 2.83% nickel, 1.68% copper and 0.12% cobalt.
New Caledonia GOTO Nickel SA
Significant progress was made in 2000 in the advancement of the first phase of this project. The pilot
plant operated successfully throughout the year, both in further proving the PAL-SX technology and
in training the core workforce, which would be required for a future commercial plant. Work on an
updated study relating to certain aspects of a commercial project continued in 2000, with the final
study completed in early April 2001. Discussions with the Government of New Caledonia on the
fiscal regime applicable to the project resulted in an agreement in principle being reached on such a
regime in early 2001.
The next stage of the development of the Goro deposit includes basic engineering and environmental
permitting, as well as the continued operation of the pilot plant through 2001. The total cost of the
programme in 2001 was estimated at $100 million. A commercial plant is currently expected to have
an annual capacity of 54000 tonnes of nickel and 5400 tonnes of cobalt.
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EXECUTIVE SUMMARY
Raglan
Falconbridge sees Raglan, its newest mine, as having great expansion potential and says that recent
exploration results are encouraging. Mineral reserves now stand at 19 mt. The company is currently
evaluating expanding its production to 30000 tonnes of nickel from 21000 tonnes, annually, which
would substantially reduce its cash costs, both at Raglan and further downstream at its smelter
complex and refinery.
Koniambo
Drilling has begun on the world-class Koniambo deposit to determine the viability of building a
54 000 tonne per year nickel in ferro-nickel plant in the North Province of New Caledonia. The
framework for the project has been established, and Falconbridge expects to complete the feasibility
studies by 2002. To date, resources of 132.4 mt, grading 2.46% nickel and 0.06% cobalt, have been
identified.
Murrin Murrin
Great hopes have been placed in this project, which once completed will be a major addition to
Australia's nickel-producing capacity. However, production is still in the process of being rolled out
according to a multi-stage programme, and much will depend on the nickel market at each given
stage.
Murrin Murrin is the largest of the three Australian 'mega' projects, and by mid-2001 output had
been significantly ramped up from its initial 1999 output. The owner, Anaconda Nickel, said that the
mine will reach 95% production by June 2002.
Anaconda and Glencore have committed to the expansion of Murrin Murrin to a total production
capacity of 115000 tonnes per annum nickel and 9000 tonnes per annum cobalt.
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EXECUTIVE SUMMARY
DEMAND OUTLOOK
The total world demand for primary nickel grew by 6.3% in 2000, to a record level of 1 115 000
tonnes. This increase in demand reflected both increases in inventories held by consumers, who, it
is believed, were replenishing their inventory levels from the relatively low levels at the end of
1999, and an estimated 12% growth in consumption of primary nickel in non-stainless steel
applications.
The longer-term outlook for stainless steel is quite positive. One growth area for stainless steel is in
the manufacture of civil aircraft. Boeing estimates that worldwide travel will increase by 5.1% per
year for the next 20 years. Many of today's aircraft engines consist of over 30% nickel, and in this
category annual growth of 5.3% is projected until the year 2015. However, with the US-led recession
firmly in place in mid-2001, industrial activity had weakened and nickel demand had fallen
significantly, by up to 25% from end-2000 levels, as a result of a decline in stainless steel output. To
make matters worse, the terror attacks on the United States on September 11 2001 resulted in an
immediate downturn in air traffic, with figures over the following two months suggesting a drop in
air travel of some 25%. However, air industry sources believe that the drop also included some of the
effects of the economic downturn on both sides of the Atlantic and in the medium to longer term the
outlook is still bright. A major vote of confidence in the future of air travel was provided by the UK
government's go-ahead in November 2001 of the building of the long-delayed Terminal 5 at
Heathrow Airport, less than 10 weeks after the US attacks.
Construction sector
An estimated 50 mt of carbon steel rebar go into all manner of concrete structures each year, and the
stainless steel industry is targeting many of these applications, such as bridges during refurbishment
operations.
Examples of famous landmark structures utilising stainless steel include:
• Hong Kong Airport - new bridge link to city
• Jin Mao Building - Shanghai
• Kangnam Tower - Seoul
• Kuala Lumpur International Airport
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EXECUTIVE SUMMARY
Batteries
This is an exciting growth area for nickel, with demand expected to soar over coming years. The huge
leap in demand for electronic consumer goods into the first two years of the new millennium is
having a significant impact on nickel consumption in the form of rechargeable batteries. In coming
years, new forms of automotive batteries will add to this demand for nickel. The total global battery
market is enormous and is difficult to quantify, but by any estimate criteria it runs into several billion
units per year.
According to the Belgian miner and smelter Union Minière, the global rechargeable consumer battery
market reached 2450 million units in 2000, from 2050 million in 1997. Of this the majority (1180 million
units) is in the form of traditional nickel-cadmium (NiCd) battery, followed by nickel-metal hydride
(NiMH) batteries at 650 million units and lithium-ion batteries at 600 million units. For over 25 years,
Japan has dominated the production of nickel-cadmium batteries, with 70% of world markets.
By volume, the largest overall battery sectors are the non-rechargeable zinc-carbon and alkaline
consumer sectors. But although they are continuing to grow, largely in the developing world, the
most important applications and advances in design are to be found in the small rechargeable
batteries used to power portable electronic equipment and larger capacity cells for the emerging
electric vehicle sector.
The exponential growth in mobile telephones, laptop computers and other portable electrical and
electronic equipment has fuelled development programmes in rechargeable alternatives, such as the
standard nickel-cadmium (NiCd) battery. One alternative under development is the nickel-metal
hydride (NiMH) battery.
NiCd batteries
NiCd batteries are meeting their most intense competition in the key market of rechargeable cells for
portable electronic and electrical equipment from lithium-ion (Li-ion) and NiMH batteries. This
competition is particularly acute in Japan. Much of the development of alternatives to NiCd batteries
have been fuelled by growing environmental pressures against NiCd batteries, which are seen as
environmentally unfriendly. They are also outperformed by the new-generation Li-ion, NiCd
alternatives.
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EXECUTIVE SUMMARY
NiCd batteries: Chinese battery demand soars
China is the world's largest market for non-rechargeable batteries, and it is expected to become a
major market for rechargeable batteries as the use of electronic consumer goods develops. It is
proving to be a fast-growing location for NiCd. In mid-1995, Japan's Sanyo Electric Co formed a
joint venture with China's Shenzhen Huaqiang Holding to produce rechargeable NiCd batteries in
Shenzhen. The plant started off as an assembly operation, but in 2000 it became a fully fledged
manufacturing facility producing 70 million units per year.
China produces 250 battery varieties in 14 series, equivalent to roughly one-third of the total world
output. China's consumption of batteries is going up rapidly, with the expansion of its consumer
goods market and product diversification of domestic electric appliances.
NiMH battery development: the role of Japan
These batteries are starting to play a prominent role in the consumer rechargeable cell market. In a
joint venture with Duracell and Varta of Germany, Toshiba is now a major force in the production of
these batteries, with an output of some 100 million units per year.
The amount of nickel required to make nickel-metal hydride (NiMH) batteries could reach 50 000 to
70000 tonnes by 2002. Consumers are expected to replace nickel-cadmium batteries with nickel-
metal hydride ones, and the production of commercial hybrid electric vehicles will probably adopt
nickel-metal hydride batteries.
Worldwide sales of cellular phones, portable video cameras and personal computers have
skyrocketed, and nickel consumption in NiMH batteries in 2000 was put at 30 000 tonnes.
In the automotive sector, the many advantages of NiMH batteries make them an ideal choice for
hybrid cars. Toyota has linked up with a couple of Matsushita Electric subsidiaries to establish a
company to further develop and produce between 5000 and 10000 NiMH batteries per year for the
electric vehicle market. The Ovonic Battery company and the General Motors-owned Opel have also
launched their NiMH battery-powered mini van, the new Zafira. The van serves as a research
platform to develop the fuel cell electric drive vehicle.
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EXECUTIVE SUMMARY
Li-ion batteries: demand growth to surpass NiMH in the long term
While much focus in the short to medium term has been on the expected growth in demand for
NiMH batteries, in the longer term it could be Li-ion batteries that have the greater potential as a
replacement for NiCd batteries. This potential is seen across virtually all the demand sectors in which
NiMH is currently benefiting. The US Advanced Battery Consortium, which is now in its second
phase of development, has expressed its preference for backing work that develops NiMH
technologies in the medium term, but backs lithium derivatives as a long-term solution for cost-
effective, long-range, rapid recharge electric vehicle batteries.
Li-ion battery output in Japan has grown at a phenomenal rate, from 12 million units in 1994, 40
million units in 1995, 115 million units in 1996, 250 million units in 1997, 350 million in 1998 and an
estimated 700 million units in 2001. Nomura Research Institute estimates a world Li-ion battery
market of over 600 million units in 2000 and some 1100 million units in 2005.
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