By Melanie Burton
KWINANA, Australia (Reuters) – BHP Group <BHP.AX> <BHPB.L> plans to start production of nickel sulphate in the second quarter of next year, as it ramps up sales of its nickel products to the battery industry, asset president Eddie Haegel said on Friday.
BHP currently produces around 75,000 tonnes of nickel metal at its Kwinana refinery on the outskirts of Perth, which it sells mostly to chemicals makers in Asia who turn it into nickel sulphate, used to make batteries for electric vehicles (EVs).
The miner, which in 2015 considered closing the plant due to a drop in demand from the stainless steel industry, is currently building what it expects to be the world’s biggest nickel sulphate facility to serve the EV battery market directly.
Demand for the raw materials for electric vehicles is expected to boom as more EVs take to the road in coming years, although lithium miners have faced a rocky time this year after a supply glut hammered prices.
“We anticipate that there will be no sustainable premium in the lithium sector, whereas we think that is not the case for nickel,” Haegel told a media briefing at the plant.
“We think that in the medium to longer term there will be a margin that will be sticky for nickel, and so we consider it an attractive commodity.”
Haegel said sales of nickel sulphate would generally be contracted on single or multi-year agreements, with a set premium on top of the London Metal Exchange nickel price.
BHP initially plans to produce some 100,000 tonnes of nickel sulphate a year, containing the equivalent of around 22,000 tonnes of nickel, and will ramp up production in coming years.
“We will be bringing in new supply which we obviously want to try to match with demand so we have got flexibility around the rate at which we ramp up. If we don’t put it into sulphate we put it into powder and briquettes,” he told a press briefing.”
The miner could eventually triple capacity with potential second and third stage expansions, but work on creating a separate circuit at the facility to extract cobalt has been on the back burner due to weak nickel prices and a fire at BHP’s Kalgoorlie nickel smelter, he said.
“We will end up selling … to some car manufacturers, battery makers, and the cathode supply chain, that full cross section is very likely to happen,” he said.
In a presentation, BHP said it sold about 78% of its nickel production to the battery industry in the second half of the 2019 financial year, up from just below 60% a year ago.
Nickel is still a niche business for the world’s biggest miner, contributing just $42 million (£34.7 million) to underlying earnings in the December half year, compared with $3.5 billion from iron ore.
(Reporting by Melanie Burton; editing by Richard Pullin)