As the world moves towards cleaner forms of energy to achieve net zero emissions targets, the critical minerals and metals needed to reach those goals are stepping into the limelight.
Nickel is one of these critical minerals. It is essential for the batteries used in electric vehicles, which are becoming more popular by the day as vehicle manufacturers and consumers embrace the EV revolution and countries add incentives or build in legislation supporting their adoption. This revolution is helping us move away from high CO2-emitting internal combustion engines and toward cleaner options.
The energy transition at the heart of EV adoption could also provide attractive investment opportunities for nickel and the companies that discover and extract it.
Although nickel is associated with stainless steel production, a higher grade of this critical mineral is essential to electrifying the world’s transportation and providing clean energy storage options. Nickel is the most important metal by mass in the lithium-ion battery cathodes used by EV manufacturers for hybrid and battery electric vehicles (EVs).
Lithium-ion battery cells are composed of four main components: a cathode, an anode, an electrolyte and a separator. The cathode generally contains lithium mixed with nickel and other minerals. Nickel often makes up at least one-third of nickel manganese cobalt (NMC) cathodes and 80% of nickel cobalt aluminum (NCA) cathodes.
The latest research indicates that adding more nickel to EV batteries boosts their energy density and increases their drivable range.1 Because of this, it is estimated that nickel demand for use in EVs and battery storage may increase nearly 20 times from 2020 to 2040, making it potentially one of the most sought-after minerals for the clean energy transition.2
Although plenty of nickel is in the earth’s crust to support a major EV battery ramp-up, the purity of nickel required for EV batteries must be quite high. EV batteries require Class 1 nickel instead of the Class 2 nickel used for stainless steel. Class 1 nickel is of the highest purity and is more difficult to find. Mining nickel is capital intensive, and it takes many years to go from discovering a nickel deposit to extracting it from the earth.
In addition to batteries and stainless steel, nickel is also needed to ensure the durability, integrity and life of nuclear power stations and is used in building solar, wind and geothermal energy sources.
The decade ahead holds great promise for nickel and the other critical minerals that are key to unlocking clean energy that will power the planet for generations to come. To make this vision a reality, massive investment will be required in the mining and processing of metals like nickel, and governments worldwide are implementing policies and regulations to align with the expected increase in demand.
Several governments, including the U.S., Canada and the EU, have designated nickel as a critical mineral and are moving to secure supply for its role in the energy transition.
Nickel miners may be well positioned to benefit from increased investment in the low-carbon and renewable energy sector and may offer an attractive opportunity to investors seeking access to nickel through companies that are upstream in the supply chain.
Sprott Energy Transition ETFs are designed to give investors access to the critical minerals driving the global energy transition. To learn more, please visit the website sprottetfs.com or call 888.622.1813.
1 Source: The Nickel Institute, March 2023.
2 Source: "The Role of Critical Minerals in Clean Energy Transitions,” International Energy Agency (IEA), May 2021.
Special Note: Jesse Day is not an employee or an affiliate of Sprott Asset Management LP. The opinions, estimates and projections ("information") contained within this content are solely those of the presenter and are subject to change without notice. Sprott Asset Management LP makes every effort to ensure that the information has been derived from sources believed to be reliable and accurate. However, Sprott Asset Management LP assumes no responsibility for any losses or damages, whether direct or indirect, which arise out of the use of this information. Sprott Asset Management LP is not under any obligation to update or keep current the information contained herein. The information should not be regarded by recipients as a substitute for the exercise of their own judgment. Please contact your own personal advisor on your particular circumstances. Views expressed regarding a particular company, security, industry or market sector should not be considered an indication of trading intent of any investment funds managed by Sprott Asset Management LP. These views are not to be considered as investment advice nor should they be considered a recommendation to buy or sell.
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