Industry Insights | Accelerated Electrification, with Nickel's Importance Increasing

Nickel ore is a mineral aggregate containing nickel metal or nickel-iron compounds that can be economically utilized. It is an important raw material in the field of nickel metal and nickel alloy smelting. Nickel is a silver-white metal with good mechanical strength and workability, refractory to high temperatures, and chemical stability. It is widely used in the manufacturing of stainless steel and alloy steel.

Currently, more than 50 types of nickel-bearing ores have been identified. Among the nickel ores with economic utilization value, they can be divided into two categories based on the occurrence form of nickel in the ores: nickel sulfide ores and nickel oxide ores.

In nickel sulfide ore, nickel exists in the form of free nickel sulfide, mainly as magmatic leachable copper-nickel ores. Ores with a nickel content of more than 3% are considered rich ores and can be smelted directly, while those with a nickel content below 3% require beneficiation treatment. When the nickel ore content is below 3%, it is mainly accompanied by a large amount of metallic minerals and gangue minerals.

In nickel oxide ore, nickel exists in the form of free nickel oxide, formed by the weathering and metamorphism of ultramafic rocks, with a nickel content of about 1%-4%. Nickel oxide ore is basically divided into two categories: red soil nickel ore and nickel silicate ore.

The nickel smelting industry in China has mature production processes, severe product homogenization, and relatively low entry barriers.For a long time, affected by the relatively low entry barriers into the nickel smelting industry, the market concentration of the nickel smelting industry in China has not been high, and there is a significant polarization within the industry. Among them, nickel smelting enterprises with larger scale, higher technological levels, and long-term stable cooperative relationships with overseas miners and stainless steel manufacturers have stronger competitiveness.

With the nickel smelting industry in China entering a phase of restructuring, small enterprises with backward capacity and serious pollution issues have now ceased production or switched to other industries, effectively increasing market concentration. Compared with midstream nickel mining companies, large nickel smelters have achieved integrated operations, while small and medium-sized nickel smelters have weaker bargaining power.

China's domestic nickel ore resources are mainly sulfide nickel, which affects the early development stage of China's nickel smelting industry, which was primarily based on pyrometallurgy. In the past decade, with the continuous expansion of China's nickel ore imports, the proportion of imported nickel ore has gradually increased to include nickel oxide ore. Currently, China's nickel smelting industry mainly relies on pyrometallurgical and hydrometallurgical technologies for nickel oxide ore.

From the perspective of the nickel product and service industry chain, the upstream participants are nickel ore mining equipment suppliers; the midstream participants are nickel ore mining enterprises and nickel smelting enterprises; the downstream includes stainless steel, batteries, alloys, etc.

Specifically, upstream nickel ore mining equipment suppliers in the industrial chain include manufacturers of civil blasting materials and mining machinery.

Civil blasting materials are mainly used for surface earthwork and rock removal operations in mines, as well as nickel ore mining and crushing processes, and are considered consumables in the nickel ore mining sector. The producers of civil blasting materials in the upstream of the industrial chain include industrial detonators, industrial ropes, and industrial explosives. The entry threshold for the civil blasting materials industry in China is high, with strict industry supervision and limited market openness. Competition is relatively mild, and there are regional monopolies in the industry. Enterprises engaged in the industry need to have a production license for civil explosive hazardous materials. At present, the issuance of new civil blasting materials production licenses has been restricted, indicating limited market openness. In addition, due to the explosive hazards of civil blasting materials, the product transportation radius is small, and the sales areas of enterprises are limited.

Small and medium-sized enterprises basically monopolize the civil blasting materials market in their regions, but their product sales scope is relatively limited. At present, only a few leading enterprises such as Sichuan Yaohua, Jiangnan Chemical Industry, and Leiming Kehua have the strength to sell across regions. Affected by this pattern, midstream nickel mining enterprises have limited options when purchasing civil blasting materials, while upstream civil blasting materials enterprises have a higher bargaining power.

Mine machinery and equipment manufacturers mainly manufacture and sell specialized machinery and equipment required for the midstream nickel ore mining and transportation sectors. Mine machinery and equipment mainly include mining drills, excavators, loaders, and trucks. Mine machinery and equipment are characterized by one-time investment and continuous output. The market for mine machinery and equipment in China is highly concentrated, with leading enterprises such as Sany Heavy Industry and XCMG Group having a market share exceeding 70%. These leading enterprises possess large-scale mine machinery production technology, and some products, including mining trucks and excavators, have successfully entered the international market.

The market scale of China's mining machinery industry is highly correlated with the development of downstream mining operations. Over the past five years, affected by factors such as China's macroeconomic slowdown and the overall environmental rectification of the mining industry, the market scale of China's mining machinery industry has basically remained stable. Chinese mining machinery manufacturing enterprises have a wide range of applications and high market demand. Compared with midstream enterprises, Chinese mining machinery manufacturing enterprises have stronger bargaining power.

The nickel ore industry in China is a downstream-driven and resource-dependent sector. Stainless steel is the largest consumer downstream of nickel ore, accounting for about 80% of the total consumption over the years.China is the world's largest producer and consumer of stainless steel. Driven by the growth in downstream stainless steel demand, China's nickel ore industry has maintained rapid growth.In the past decade, driven by macroeconomic growth and rapid growth in disposable income among residents, the downstream construction sector and the daily stainless steel metal products industry have developed rapidly, further driving the upstream nickel ore industry to develop at a fast pace.

In the future, with the rapid rise of new energy vehicles in China, the application fields of stainless steel and batteries will expand, potentially further driving up the prices of nickel ore and market demand in China.

At present, new energy electric vehicles are the mainstream direction of new energy development. Lithium ternary batteries are the main power source batteries for electric vehicles, and high-nickelization is the main development direction of power batteries. The rapid development of new energy vehicle power batteries will have a long-term impact on the nickel industry structure.

Global new energy passenger vehicle sales increased from 1.162 million units in 2017 to 6.311 million units in 2021, with an average annual compound growth rate of about 52.7%. In the future, global new energy passenger vehicle sales will continue to maintain rapid growth, with the potential to reach 24.185 million units by 2026, and an average annual compound growth rate of about 25.5% from 2022 to 2026.

In power batteries, as the nickel content increases, the specific capacity of ternary cathode materials gradually rises, and so does the energy density of the battery cells.In the future, with the continuous optimization of the performance of high-nickel cathode products, the energy density of batteries is expected to further improve, and the proportion of nickel applications in the power battery field will also continue to rise.The global installed capacity of power lithium batteries increased from 64.3 GWh in 2017 to 293.7 GWh in 2021, with an average annual compound growth rate of about 46.2%. In the future, global shipments of power lithium batteries will continue to grow at a high rate, increasing from 489.5 GWh in 2022 to 1,688.1 GWh in 2026 at an average annual compound growth rate of 36.3%.