Battery Metals

Nickel touched a 10-week high on Wednesday as falling stockpiles and a tightening of time spreads suggested an undersupplied market.

Benchmark nickel on the London Metal Exchange (LME) closed down 0.4 percent at $11,630 a tonne after reaching $11,770, its highest level since Nov. 8.

The stainless steel ingredient is up around 10 percent from a 15-month low on Jan. 2. It has been caught up in a broader slide in industrial metals because of fears that China’s economic growth is slowing. Stockpiles in exchange warehouses are near multi-year lows and the price of cash nickel surged this week compared with contracts for later delivery, suggesting a shortage of nearby material.

But Citibank analyst Oliver Nugent said the tighter spreads were likely due to temporary factors related to the expiry of an LME monthly nickel futures contract on Wednesday.

“This is probably more a feature of a technical imbalance of longs and shorts around a key expiry than it is a reflection of a tightening in nickel’s fundamentals,” he said. The nickel market will likely be fairly balanced in 2019 after a small deficit of 40,000 tonnes in 2018, he added,
predicting prices around $11,500 at the end of this year.

STOCKS: Nickel stocks in LME-registered warehouses at around 200,000 tonnes are down from more than 360,000 tonnes at the start of 2018 and at their lowest level since mid-2013. Nugent said the drawdowns were partly due to metal being moved to non-exchange warehouses, rather than because it has been consumed.

SPREADS: The discount of cash nickel compared to three-month metal rose to $67 from $9, which was the smallest discount in nearly two years. But at $67 the discount remains below recent levels of around $80 to $90. WARRANTS/POSITIONS: Exacerbating a squeeze on the LME, a single entity held between 40 and 49 percent of nickel warrants and there were large holders of long and short positions in the January futures contract. COLUMN: Flash LME nickel squeeze may be a taste of things to come: Andy Home CHINA: Battling a slowdown that could curtail demand for metals, China signalled more stimulus measures in the near term as it aims to achieve “a good start to 2019”. RUSAL: The U.S. Senate voted to advance a resolution disapproving of a plan to ease sanctions on Russian companies including Rusal, the biggest aluminium producer outside China. ALUNORTE: Aluminium maker Norsk Hydro said the Brazilian state of Para had lifted a production embargo on its Alunorte alumina facility, the world’s largest refinery of the aluminium ingredient. OTHER METALS: Copper finished 0.8 percent higher at $5,970 a tonne, aluminium ended up 0.7 percent at $1,859 a tonne, zinc rose 1.7 percent to $2,497 a tonne, lead gained 0.4 percent to $1,975 a tonne and tin closed down 0.5 percent at $20,575 a tonne.

In the last decade, electric vehicles have become mainstream. Having captured a small but growing share of the passenger-car market, and an enormous amount of media buzz thanks to Tesla, the EV industry is now setting its sights on the bus market.

Several companies that manufacture battery-electric buses, or BEBs, are selling the product to cities interested in zero-emission buses that operate without trolley wire. (While many cities already have extensive networks of electric trolleybuses, such as Zurich and San Francisco, these buses require overhead wires to operate.) Manufacturers include the longstanding Canadian bus manufacturer New Flyer, China’s BYD, and the American startup Proterra.

As part of generous government subsidies to BYD, Shenzhen has replaced its entire fleet with BEBs. Cities in Europe and the United States are also experimenting with them. Moscow plans on replacing its trolleybuses with BEBs, and small and medium-sized American transit agencies have begun leasing or buying this technology. Part of the rationale behind this shift is to reduce local-diesel bus pollution; part of it is about cutting greenhouse-gas emissions, and part is the perception that BEBs are a futuristic technology.

But is the technology really ready?

There are reasons for skepticism. So far, it looks like BEBs struggle when it’s too cold (below freezing) or too hot, and on routes with hills. The global frontier of public-transit innovation in Western Europe is cautious about adopting BEBs and prefers a hybrid form of trolleybuses and battery-electric technology called in-motion charging, or IMC. Some Swiss cities are adding trolley wire at low cost while using IMC to extend the range of their existing trolleybuses several miles beyond the wire.

Range anxiety, but for buses

Battery-electric vehicles’ biggest problem has always been range. At the dawn of the automobile age, electric cars competed with gasoline and steam-engined vehicles: In 1900, 38 percent of U.S. cars were battery-powered, and only 22 percent boasted internal combustion engines. As late as the 1910s, Thomas Edison was working on an electric car and a network of charging stations. But in time, gasoline-fueled cars came to dominate the market, partly because a car’s range on a full tank of gas was far greater than on a full battery charge.

Dramatic improvements to battery technology have fed the recent EV renaissance, allowing such models as the Tesla Model 3 and BYD Qin to travel about 200 miles on one charge. That’s helped alleviate the “range anxiety” that keeps many U.S. drivers from considering an electric vehicle.

Still, the energy density of batteries remains well below that of gas. And, unlike most passenger cars, city buses run for the entire day. The big American transit agencies run buses for about 25,000 to 40,000 miles a year, which is two to three times the average distance a car is driven—and buses have a more energy-intensive urban driving cycle (with little highway running), totaling 100 to 200 miles of city running per weekday.

Moreover, the routes most likely to get battery-electric technology are the strongest ones, where fleet utilization is higher, since electric buses are more expensive to buy than diesel buses. This pushes up the required range for operating without midday charging.

On heavy-duty buses, the range has not been enough. Albuquerque provides one example: It found its BYD buses’ range to be only 177 miles on one charge, compared with a contractual promise of 275, and this was not enough to run a full day’s service. In Vancouver, a BEB trial talks up rapid recharging during layovers—there is no expectation of being able to run a bus for an entire day without recharging. Rapid recharging is labor-intensive, since a worker must supervise it, unlike recharging or refueling at the end of the day.

An electric bus produced by China’s BYD is parked at the announcement of the opening of an electric-bus manufacturing plant in Lancaster, California, in 2013.

In Moscow, Mayor Sergey Sobyanin has made a big push for BEBs, which in his view are more modern than the city’s expansive trolleybus network. The city recently purchased 100 buses each from two Russian automakers, Kamaz and Gaz. The London-based transit advocate Martin Wright compared Moscow’s procurement and operating costs and talked to Russian observers. Wright said (as of early fall) that Moscow’s trial routes for BEBs—trolleybus Routes 73, 76, 80, and 83—have had to use more buses just to run the same service, pointing to before and after slides. The four routes appear to have gone from 46 trolleybuses to 82 BEBs without any increase in service frequency, presumably because BEBs have considerable down time for midday charging.

Nickel touched a 10-week high on Wednesday as falling stockpiles and a sharp tightening of time spreads suggested an undersupplied market.

Benchmark nickel on the London Metal Exchange (LME) was down 0.2 percent at $11,650 a tonne at 1146 GMT after reaching $11,770, its highest level since Nov. 8.

The stainless steel ingredient is up around 10 percent from a 15-month low on Jan. 2. It has been caught up in a broader slide in industrial metals because of fears that China’s economic growth is slowing.

Stockpiles in exchange warehouses are near multi-year lows and the price of cash nickel has surged compared to contracts for later delivery, suggesting a shortage of nearby material.

But tight spreads are likely due to temporary factors related to the expiry of an LME monthly nickel futures contract on Wednesday, Citibank analyst Oliver Nugent said.

“This is probably more a feature of a technical imbalance of longs and shorts around a key expiry than it is a reflection of a tightening in nickel’s fundamentals,” he said.

The nickel market will likely be fairly balanced in 2019 after a small deficit of 40,000 tonnes in 2018, he added, predicting prices around $11,500 at the end of this year.

STOCKS: Nickel stocks in LME-registered warehouses at around 200,000 tonnes are down from more than 360,000 tonnes at the start of 2018 and at their lowest level since mid-2013. Nugent said the drawdowns were partly due to metal being moved to non-exchange warehouses, rather than because it has been consumed.

SPREADS: The discount of cash nickel compared to three-month metal has collapsed to $9 — the lowest in nearly two years — from almost $90 at the start of January.

WARRANTS/POSITIONS: Exacerbating a squeeze on the LME, a single entity held between 40 and 49 percent of nickel warrants and there were large holders of long and short positions in the January futures contract.

CHINA: Battling a slowdown that could curtail demand for metals, China signalled more stimulus measures in the near term as it aims to achieve “a good start to 2019”.

RUSAL: The U.S. Senate voted to advance a resolution disapproving of a plan to ease sanctions on Russian companies including Rusal, the biggest aluminium producer outside China. ALUNORTE: Aluminium maker Norsk Hydro said the Brazilian state of Para had lifted a production embargo on its Alunorte alumina facility, the world’s largest refinery of the aluminium ingredient.

OTHER METALS: Copper was 0.6 percent higher at $5,957.50 a tonne, aluminium was up 1.3 percent at $1,868.50, zinc had gained 1.3 percent to $2,487, lead rose 0.1 percent to $1,970 and tin was up 0.4 percent at $20,750.

VRB Energy, a maker of flow batteries headquartered in Canada and owned by a metal resources and mining company, said the first phase of a 40MWh flow battery project in China has now been commissioned.

VRB Energy (VRB), 82% owned by High Power Exploration, a base metals-focused exploration company led by noted mining financier Robert Friedland, provided Energy-Storage.news with a progress update from Hubei Province at the end of last week.

The company said that it has now successfully commissioned a 3MW / 12MWh vanadium redox flow battery energy storage project which represents Phase 1 of the Hubei Zaoyang Utility-scale Solar and Storage Integration Demonstration Project, set to be 10MW / 40MWh when completed. It represents the latest step since the previous update on the project, when the first 250kW / 1MWh battery module was commissioned a few months ago.

“This project represents a key step in applying China’s rich vanadium resources to renewable energy development that will transform the energy industry and help alleviate environmental problems,” Robert Friedland said in his capacity as VRB Energy’s chairman.

Chinese national government and local government officials conducted an official inspection of the 12MWh system, thought to be the largest system using this technology in China in operation to date.

Investment and integration

The main investor in the project is Hubei Pingfan Ruifeng New Energy Technology Ltd. Company chairman Xie Guoguang pointed out in a statement that Hubei Province has abundant vanadium resources.

“This project combines locally sourced vanadium with VRB Energy’s advanced energy storage technology to serve as a brand new partnership model for fostering local economic development, energy transformation, comprehensive utilization of resources and sustainable development,” Guoguang said.   

As previously mentioned on this site, the Hubei project and other large demonstration systems like it are being built in China to support the aims of its National Development and Reform Commission’s national energy storage policy. VRB Energy said the Hubei Zaoyang project will inform the development and construction of multiple flow battery projects in the province, each of hundreds of megawatts.

In last year’s special two-part feature article on a selection of flow battery providers and their strategies, VRB’s VP for business development Jim Stover said that the company saw its vertical integration capability as a possible key to success in the energy storage market.

VIZn Energy fights back with China agreement

Meanwhile, Energy-Storage.news has also heard from VIZN Energy, a US-headquartered provider of its own flow batteries – this time based on a zin-iron chemistry – that the company is entering the Chinese market.

Last heard from when it emerged the company had fallen into difficulties, furloughing staff in the US but denying it had gone out of business, VIZN said last week that it has entered a strategic alliance with WeView Energy. WeView is a joint venture company formed by Hasen Electric, Shanghai Lingxin (controlled by Jingyi Electrical), both power conversion and switchgear equipment makers, developer Intelion and Jiangxi Lelai. WeView is working in partnership with state-owned power company PowerChina’s subsidiary, Jiangxi Electric Power Construction Corporation (PowerChina JEPCC).

WeView has taken a minority equity stake in VIZN while the two parties have formed a China licensing agreement and “mutual commitment to exclusively pursue the China utility scale storage market with ViZn technology,” VIZN said in a statement.

VIZN talked up the potential of the agreement to add the engineering, manufacturing, construction and servicing capabilities of its new local partners to the company’s push into China.

“We have been looking for game-changing technology like VIZN’s for a long time. Every year, PowerChina builds gigawatts of renewable energy projects, all of which require a reliable, 20-year, energy storage solution,” WeView president Ge Yuhua said.

VIZN CEO John Lowell said his company’s flow batteries, which promise a 20-year lifetime with zero capacity fade and twice daily cycling, “is uniquely suited to support the integration of the thousands of gigawatts of new wind and solar power to be installed globally over the coming decades”.

Lowell said VIZN had gone looking for strong partners to help it move into China, which the CEO called “one of the largest markets in the world for grid-scale storage”.

Indian technology company Log 9 Materials, an offshoot of the Indian Institute of Technology Roorkee, has developed a metal air battery with an energy density ten times that of conventional lithium-ion.

The battery uses water as fuel and requires “refilling” every 100 kilometers, thanks to its use of graphene.

The only part of the battery requiring regular replacement is an aluminium anode, which needs to be replaced every 1000 kilometers and can be recycled.

The benefits of the technology include the eliminated need for recharging, charging stations and related infrastructure, as well as zero emissions.
Further benefits extend to smart energy generation and storage, and decreased reliance on limited elements such as cobalt.

The concept is not a new one. Several companies have been working towards similar technologies and the concept has drawn the interest and attention of Tesla, currently the leader in EV vehicle market share globally.

The metal air batteries use aluminium as an anode and air (oxygen) as a cathode. Graphene has proven to be an excellent material to facilitate air transfer, thanks to its high porosity. Water provides a low-cost electrolyte.

There are challenges to the technology however, including the inevitable loss of battery performance due to corrosion, thus plans for prototype use in mobility applications is planned for 2020, following initial offerings for stationary applications.

Batteries using this new technology are expected to be on par, or cheaper than current Lithium ion-based technology.

There are times when something becomes so clearly evident; it becomes difficult to ignore. For a lot of Tesla’s longtime critics, this would be the company’s lead in the EV market. Tesla proved that it could compete in the auto market in 2018. According to a fund manager who beat the markets last year, though, 2019 could be a year where the gap between Tesla and its competitors would widen even further.

ARK Invest founder and CEO Catherine Wood was recently featured on a segment of CNBC’s Fast Money. During her appearance, the ARK CEO, who holds an almost unreal $4000 long-term price target for Tesla, was asked if the influx of electric cars from traditional automakers would be a problem for the Silicon Valley-based carmaker. Wood noted that such a scenario would be unlikely this year, since Tesla holds three particular advantages over its competitors.

“We believe that the transportation industry is going to shift wholesale to electric, and Tesla is ahead of the pack,” she said.

Wood later explained that Tesla’s strengths come from its capability to produce battery cells for its vehicles like the Model 3, thanks to the Nevada Gigafactory and its partnership with Panasonic. The ARK founder also mentioned that Tesla’s use of cylindrical lithium-ion battery cells benefits the electric car maker’s finances, since most competitors from legacy auto are prone to using lithium-ion pouch cells, which are usually more costly.

“Tesla is riding down the consumer electronics cost curve, which is much, much lower than that lithium-ion pouch. They’ve done an amazing thing from an engineering point of view no one else thought was possible. That puts them way ahead of the game,” Wood said.

Apart from its edge in batteries, the ARK Invest CEO pointed out that Tesla’s development of its custom hardware and the company’s tendency to constantly innovate would play a key role in establishing its lead in the EV market. Wood notes that other carmakers would likely rely on the hardware of companies like NVIDIA, which are powerful but follow a more conservative design cadence of 3-5 years. As such, it would be difficult to catch Tesla’s pace of in-house innovation.

Lastly, the fund manager stated that Tesla’s billions of real-world Autopilot miles also gives the company an edge over competitors. This data, Wood noted, is ultimately what will power an autonomous vehicle in the future. In this regard, Tesla is the undisputed leader, with the company announcing late November that its fleet has driven over 1 billion miles on Autopilot. This is something that other self-driving car companies such as Waymo or Cruise Automation does not have.

This particular edge was mentioned previously by Nidhi Kalra, a senior information scientist for the RAND Corporation. Previously addressing Waymo’s vehicles, which have racked up billions of miles in simulation, Kalra noted that there is no replacement for data gathered in actual roads.

“The problem with any simulator is that it’s a simplification of the real world. Even if it stimulates the world accurately if all you’re simulating is a sunny day in Mountain View with no traffic, then what is the value of doing a billion miles on the same cul-de-sac in Mountain View? I’m not saying that’s what anyone’s doing, but without that information, we can’t know what a billion miles really means. Real-world miles still really, really matter. That’s where, literally, the rubber meets the road, and there’s no substitute for it,” she said.

In a way, though, the emergence of competing electric cars bodes well for Tesla. Elon Musk himself, after all, admits that the company exists to accelerate the advent of sustainable energy. In a recent appearance at CBS’ 60 Minutes alone, Musk boldly stated that he does not even mind if Tesla gets beaten by a company that produces superior electric vehicles.

“If somebody comes and makes a better electric car than Tesla, and it’s so much better than ours that we can’t sell our cars, and we go bankrupt, I still think that’s a good thing for the world. The whole point of Tesla is to accelerate the advent of electric vehicles and sustainable transport. We’re trying to help the environment; we think it’s the most serious problem that humanity faces,” he said.