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UK battery maker Britishvolt has signed a two-year agreement with the national battery manufacturing development facility UK Battery Industrialisation Centre, or UKBIC, to jointly develop and manufacture next generation nickel-rich battery cells for electric vehicles, it said Jan. 24.

The battery maker is developing high energy, high nickel lithium-ion battery cells to allow EVs to achieve better performance and range and aims to work with UKBIC under the multi-million pound deal to eventually reach mass production and commercialization.

“UKBIC is an essential ingredient in BV’s accelerated roadmap to market, providing a platform and environment that delivers high quality development cells in a time period that would be almost impossible in other territories,” according to Briishvolt’s president of global operations, Graham Hoare.

He added that Britishvolt aimed to work with customers from early on to offer flexibility and specific attributes for their specific application requirements.

The partnership would allow Britishvolt to successfully scale up its tailormade battery cells, designed specifically for customer requirements, Britishvolt Chief Technology Officer Allan Paterson said.

Britishvolt manufactured and tested its first production intent high technical maturity development lithium-ion cells at UKBIC at the end of 2021, which it said bypassed expectations, the battery maker said.

Nickel in a battery cell’s cathode increases an EV’s energy density and therefore the overall driving range. As car manufacturers have looked to improve the energy density of batteries, configurations of these batteries have evolved from three parts nickel, manganese and cobalt (NMC 3-3-3) to the latest eight parts nickel, one part manganese and cobalt (NMC 8-1-1) configuration.

“The manufacture of low carbon battery cells are vital for a successful energy transition to Net Zero,” UKBIC Managing Director Jeff Pratt said. “We are here to support UK companies scaling up their battery production and up skilling their workforce, and we welcome the opportunity to support Britishvolt on their journey.”

UKBIC is funded by the UK government to assist the UK auto industry to bring new battery technologies to market.

On Jan. 21, Britishvolt announced it had received funding from the UK government, as well as GBP1.7 billion ($2.3 billion) from private investors Tritax and abrdn for the construction of its gigafactory in Blyth, Northumberland

The battery maker is building a 30 GWh gigafactory in phases, which will manufacture enough battery cells a year for over 300,000 electric vehicle battery packs, equivalent to around 25% of current UK vehicle manufacturing.

Views of global nickel production in 2022 are spread across the board, with market analysts either viewing a surplus, deficit or balanced output in the face of robust demand and supply.

The global nickel market is expected to see surplus of 76,000 mt in 2022, from a deficit of 134,000 mt in 2021, the International Nickel Study Group (INSG) said.

World primary nickel production is forecast to reach 3.12 million mt in 2022, a rise of around 10% from 2021, while demand is seen at 3.044 million mt in 2022, an increase of about 18% from 2021, INSG said.

Indonesia, the world’s top nickel producer, is currently expanding its domestic nickel industry, aided by new high-pressure acid leaching (HPAL) projects, Commerzbank’s commodities analyst Daniel Briesemann said in a note.

“However, there is a degree of uncertainty in these [supply] figures, especially with regard to Chinese and Indonesian production,” INSG added. “The estimates do not include any adjustment factor for possible production disruptions.”

Indonesia and the Philippines are the world’s top two producers, but major deposits are also mined in Australia, Canada, Brazil, Canada, China and Russia.

Pivotal role in energy transition

Nickel is set to play a pivotal role in energy transition due to the growing market for nickel-cobalt-aluminum batteries used in electric vehicles, and as a result mothballed or abandoned mining projects have experienced a renaissance, Briesemann said.

“Investments are also being made in new production capacity further along the value chain. For example, new plants for the production of nickel pig iron (NPI) are being built in Indonesia,” Commerzbank’s analyst said.

Russian Nornickel — the world’s largest producer of high-grade nickel and palladium, major producer of platinum and copper — said surging Indonesian nickel pig iron (NPI) production will be the main driver of supply growth in 2022.

“However, if there are renewed restrictions in Indonesia to combat coronavirus, the expected production growth is probably overestimated,” Briesemann said.

Additionally, recent power cuts in China have resulted in further declines in nickel output, while Covid-19 restrictions continue to impact production in Indonesia and New Caledonia, Macquarie analysts said.

Australian multinational bank ANZ said in a note that, in the fourth quarter of 2021, the high amount of energy needed and the carbon intensity of NPI weighed on China’s NPI output, led to China increasing imports of NPI and refined nickel.

Nornickel sees swing to surplus

Nornickel said it expects in the global nickel market a surplus of 59,000 mt in 2022, swinging from a 149,000 mt deficit in 2021.

The 2021 deficit was caused by 17% growth in global nickel demand — driven by the stainless-steel sector, which accounts for just over 70% of all nickel demand, and batteries — with the drop in the company’s own production in 2021 also a key factor.

ANZ said that, while Indonesia and the Philippines were adding incrementally to global supply, supply risks in both countries are expected to be high due to regulatory changes.

Indonesia is expected to face pressure to reduce the environmental impact of production, as the majority of its nickel industry uses coal-fired power, the Australian bank said.

At COP26 last year, the Indonesian government signed up to a pledge to end coal use, though also not supporting a clause calling to stop construction and financing of new coal-fired power stations, ANZ said, adding that China also committed not to build coal-fired plants overseas.

“So, even with a plentiful pipeline of projects to increase production to 1 million mt, the carbon footprint of coal-powered plants in Indonesia may put off manufacturers of batteries and electronic vehicles who are chasing a green nickel supply,” ANZ said.

“Authorities are also exploring the possibility of taxing nickel product exports of less than 70% nickel content, to grow domestic processing. This could be another nickel supply headwind in 2022,” it said.

Balanced market

ANZ said it is likely that demand for nickel for the production of stainless steel and non-stainless steel will hold up in 2022, which will keep the market largely balanced this year, leaving little room for currently depleted inventories to be restored.

TD Securities analysts expect a minor deficit in 2022, though the delicate supply-demand balance could be tested by a potential for Indonesia to ban exports of various nickel product, or the imposition of a tax, as noted by ANZ.

“These policies remain highly uncertain, but the risk is on traders’ minds considering that government ministers have historically come through on their suggestions surrounding taxes or bans on exports of certain mineral products,” TD Securities said.

“However, given the elevated number of high value investments underway and planned, it’s not clear that such a restrictive policy will take effect,” the Canadian investment bank said.

UK broker Liberum’s 2022 nickel forecast is $16,600/mt, TD Securities forecast is $19,313/mt, Macquarie, $19,375/mt, ANZ $21,000-$21,500/mt, while Commerzbank sees nickel prices reaching $22,000/mt by the end of this year.

The London Metal Exchange three-months spot nickel price was trading at $20,300/mt ($9.21/lb) as of 1120 GMT Jan. 6.

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Russian mining and steel companies are looking forward to the end of a15% export duty on steel in the New Year, but the benefits will be lessened by a hit from a new tax system, designed by the Russian government to tap deeper into metallurgical companies’ earnings when market prices are high.

In January 2022, Russia’s mineral extraction tax (MET) for iron ore will increase significantly, by twofold or more, and tax on coking coal will rise by a minimum of 25%.

The country will also introduce an excise on liquid steel, payable on every ton produced, including unsold volumes. Nevertheless, Russian steel may become more competitive on export markets than it is today. The new taxes follow the expiry of the 15% export duty on steel valid from August to December 2021 that in the current market exceed the sum of the revised MET rates and the new steel excise.

The tax code revisions were prompted by steelmakers’ record high earnings. H1 2021 EBITDA of major steelmaker Evraz doubled on year to $2.1 billion; 9M 2021 EBITDAs of peer companies MMK and NLMK tripled to $3.3 billion and $5.5 billion, respectively.

The new tax hikes have been designed to reflect these extraordinarily high profits and uphold tax revenues after the current export duties on ferrous metals expire.

Together with the existing iron ore and coal METs, Russia’s 15% export tariffs on steel are meant to provide the state with Rb125 billion ($1.7 billion) in 2021. The revised taxes could potentially bring this to Rb145 billion at today’s prices and currency rates. The fiscal burden will vary from mill to mill.

Between the steel excise and the existing export duties, the excise is viewed as a lesser evil. Export of the cheapest products — slab and billet – currently incur $90-$120/mt fees, while the excise, if effective now, would be a tenth of that: $13-$20/mt, Platts estimates.

A Russian longs steel producer and large exporter expects the excise will be far less painful than the 15% export duty enforced between August-December 2021. “It will be less for the entire year than for the five months of the export duty,” he said.

Formula-based taxes

Russia has developed formulas linking coal and iron ore METs – currently fixed or stable rates — to commodity prices; they will become more variable and exposed to currency fluctuations.

One formula will be defined by the FOB Australia coking coal price multiplied by a royalty coefficient of 0.015 and by the dollar-ruble exchange rate. Another will be based on the CFR China iron ore price multiplied by a 0.048 coefficient, by the dollar-ruble rate and by the ore’s iron content divided by 62%. All formula components represent monthly averages.

If coal sinks below $100/mt, the tax will be equal to the product of $1 and the exchange rate. Equally, if iron ore falls below $60/mt, the MET is reduced to 63 cents multiplied by the currency rate.

With the new formula, Russia’s 88 million-98 million mt/year crude coking coal output could generate Rb36 billion-Rb40 billion/year tax, seven times more than its Rb5 billion MET receipts today.

For now, iron ore extraction is taxed at 17% applied to the cost of mining, implying a Rb20-90/mt tax range for open pit operations. The new formula will raise this to Rb170/mt and above.

Assuming the MET comes to Rb180/mt, Russia’s 95 million mt/year iron ore production would fetch Rb17 billion ($230 million), versus this year’s tax gain estimated by S&P Global Platts at Rb8 billion (assuming Rb500/mt mining cost).

Little impact seen on output, sales volumes

As for the steel tax, for blast furnace (BF)-based producers this will be calculated as an FOB slab price at Russia’s southern ports, multiplied by a royalty coefficient of 0.027 and the dollar-ruble exchange rate. The excise will drop to zero if slab falls below $300/mt.

The tax for electric arc furnace (EAF)-based steel will be calculated as an FOB billet price at Russia’s southern ports, multiplied by the dollar-ruble rate, after deducting the scrap price, the Rb12,500 billet-scrap spread and 50% of the mills’ expenses on ferroalloys. The final result will be multiplied by a royalty interest coefficient of 0.3.

The maximum excise for EAF steel is limited to Rb1,000/mt; there is no cap for BF-made steel and the latter is more exposed to currency and market fluctuations.

Russia’s 70 million-72 million mt/year steel output, including 46 million mt BF- and 24 million mt EAF-route tonnages, could produce a total of Rb91 billion in excise.

Despite the obvious impact on steelmakers’ earnings, the new excise is unlikely to change much in terms of Russian steel sales volumes. It remains to be seen how the usage of exported slab and billet price assessments (FOB Southern Russian region) for tax calculation would affect the Russian mills’ export versus domestic sales strategy. A CIS trader believed that the new tax would bite into the Russian mills’ earnings but should not affect the sales volumes or production.

Russian exports may return to previous levels

Since news of the export duty on all steel products emerged at the end of June, Russian mills have reportedly been looking to evade or mitigate the additional cost. Some steelmakers changed their export product mix, or ramped up export volumes before the start of duties on August 1. Later, some withheld volumes to be able to ship after January 1, 2022 when the duty lapses.

In two selected markets, rebar and hot-rolled coil, pricing has remained strong during this period, helping mills maximize domestic sales. However, during the five-month period, exports have thrived as mills have taken the hit and paid the additional cost. In light of the pending export tax expiry on January 1, Russian export is expected to return to around previous levels. The aim of retaining more supply and bringing steel costs down for local end-users was only partially achieved by the export duties.

For example, domestic Russian prices remained elevated throughout August-December, even though initially they tanked 23% between July-September.

The export tax apparently also had little impact in the steel flat products market. Between June, when the duty was first reported, and October, Russian domestic hot-rolled coil prices fell around 36%, suggesting a fall-off in exports. However, the effect on prices seems to have been limited, as the domestic HRC prices remained relatively high during the period when duties were in place. Between July and November domestic HRC prices averaged Rb 65,793/mt, compared with an average of Rb 35,433/mt in 2019-2020, CPT Moscow, excluding 20% VAT. What the export duty appears to have achieved was to bring skyrocketing domestic HRC prices more in line with export levels, however.

The global lithium market has seen prices moving to new record highs almost daily, boosted by limited supply and good demand. This strength is expected to continue into 2022, as supply tightness persists and demand for electric vehicles continues to grow.

Seaborne lithium carbonate prices have gained 413% since the start of 2021 to $32,600/mt CIF North Asia on Dec. 14, while lithium hydroxide prices have climbed 254% over the same period to $31,900/mt CIF North Asia, according to S&P Global Platts data.

Lithium prices were due to remain strong going into 2022, according to a number of market players, due to bullish supply-demand dynamics.

According to S&P Global Market Intelligence, lithium chemical supply is forecast to 636,000 mt lithium carbonate equivalent in 2022, up from 408,000 mt in 2020 and an estimated 497,000 mt in 2021.

This was forecast by MI to be met by chemical demand of 641,000 mt LCE in 2022, up from 342,000 mt in 2020 and an estimated 504,000 mt in 2021.

The ensuing forecast deficit of 5,000 mt LCE in 2022, compares with a surplus of 66,000 mt in 2020 and an estimated deficit of 8,000 mt in 2021, with MI saying the ongoing deficit was expected to allow prices to remain strong in 2022.

Lithium looks brighter

A Tianqi Lithium spokesperson told S&P Global Platts that the market’s understanding of lithium resources was being reshaped.

“Due to its strategic significance, lithium resources will be more difficult to obtain and control. Therefore, lithium resources will become a key factor restricting the development of the industry in the medium- and long-term,” the spokesperson said.

The spokesperson also attributed rising prices to some lithium-ion battery manufacturers‘ accelerated capacity expansion and increasing downstream cathode material orders.

An Albemarle spokesperson told Platts the market would “remain tight in 2022 as new industry supply comes close to keeping up with expected demand.”

The company saw in excess of 30% growth in lithium demand through 2025, largely due to high EV production and sales, but also due to larger battery sizes, the Albemarle spokesperson added.

According to Platts Analytics, global plug-in light-duty EV sales are expected to rise to 6.5 million units in 2022 and 10.5 million units in 2025, up from an estimated 6 million units in 2021 and 3.1 million units in 2020.

To meet growing demand, several producers are planning to expand capacity, although most of the additional volumes are expected to be available earliest H2 2022, sources said.

“We heard from suppliers H1 will remain very tight, then it should be a bit better in H2,” said a consumer source, who believed prices would keep climbing until peaking around the mid-$30,000s/mt by the end of H1.

“In H2, new supply can bring some relief to the market and maybe we will start to see some price correction,” the source added.

Supply response

All existing suppliers are planning expansions. Recently, Albemarle’s MARBL joint venture with Minerals Resources in Western Australia announced plans to restart one of the Wodgina mine’s three 250,000 mt/year processing lines in Q3 2022.

Livent resumed its expansion plan and will add 5,000 mt of lithium hydroxide capacity in the US, which is expected to reach commercial production by Q3 2022. It is also adding an initial 10,000 mt lithium carbonate in Argentina, although this is only due to reach commercial production in the first quarter of 2023, with another 10,000 mt to be added in the second phase by the end of 2023.

The 25,000 mt/year Stage 2 expansion of Allkem’s Olaroz brine project in Argentina is continuing and is expected to be completed during the first half of 2022. Production at the 25,000 mt/year expansion is slated for the second half, bringing the project’s total capacity to 42,500 mt/year.

SQM targets to reach a total capacity of 180,000 mt/y next year in its Chilean brine operation, with total production expected to achieve 140,000 mt in 2022. These represent increases of approximately 60,000 mt/year and 40,000 mt, respectively, from 2021.

Pilbara Minerals is forecasting production capacity of approximately 180,000-200,000 dmt/year from its Ngungaju plant at the Pilangoora operation in Western Australia from mid-2022, as it ramps up.

This will complement existing production capacity from the adjacent Pilgan Plant, which is also increasing capacity from around 330,000mt/year to 360,000-380,000 mt/year through improvement works.

New projects should also start up next year, including Lithium Americas’ 40,000 mt/year carbonate operation in Argentina and Sigma Lithium’s 330,000 mt/year spodumene project in Brazil.