Expectations of a boom in demand for electric vehicles are leading investors and battery makers to stockpile nickel and helping to fuel a spike in global prices of the metal, Russian mining company Norilsk Nickel said on Monday.
Nornickel, the world’s second-largest nickel producer, said demand for the metal from the battery sector leapt 38 percent in the first half of this year versus the same period last year.
Along with demand from the stainless steel sector, this helped boost prices to $15,750 per tonne in June, their highest in over four years, the company said, with the battery sector accounting for 5 percent of total global nickel demand.
Nornickel said the expected pick-up in demand for electric vehicles was also a factor behind a drop in industry inventories, as investors and battery makers built up stocks.
Nickel inventories at the London and Shanghai exchanges fell to 274.000 tonnes from 411,000 tonnes between January and July, it said.
Nornickel sold 101,000 tonnes of nickel in the first half of the year. It also mines cobalt, also used in electric vehicle batteries, and revenue from that metal rose 52 percent in the first half of this year, the company added.
On a phone call with investors and producers, Nornickel said it expected the battery sector to become the industry’s second-largest market in the next few years, behind stainless steel.
“Consumption by the battery sector for electric vehicles may be lagging behind stainless steel, but it is growing at a furious pace,” said Anton Berlin, head of Nornickel’s marketing department.
The firm reported a 77 percent jump in first-half core earnings, with strong global prices offsetting the impact of U.S. sanctions on aluminium giant Rusal, which holds a 27.8 percent stake in Nornickel.
At $3.1 billion, Nornickel’s first-half earnings before interest, tax, depreciation and amortisation (EBITDA) beat analysts’ expectations.
“We enjoyed (a) favourable global commodity markets environment in the first half of 2018,” Nornickel president and co-owner Vladimir Potanin said in a statement.
“As a result, average realised prices for all our key metals (except for platinum) rallied in the range of 20-40 percent.”
Shares in the nickel producer were up 1.9 percent on the day, recovering from a fall on Friday after news that Russia President Vladimir Putin would consider a proposal to raise further revenue for the state budget from metals and mining companies.
Nornickel, which vies with Brazil’s Vale SA to be the world’s biggest nickel producer, said it expected the nickel deficit on global markets to widen from 15,000 tonnes to 124,000 tonnes.