Nickel - The Hidden Metal

Podcast Transcript

Ed Coyne: Hello and welcome to Sprott Radio. I'm your host, Ed Coyne, Senior Managing Partner at Sprott Asset Management. Today, I'm pleased to welcome a new guest to Sprott Radio, Gary Coates, manager of Market Development and Technical Education at the Nickel Institute. Gary, thank you for joining Sprott Radio.

Gary Coates: Thank you for having me.

Ed Coyne: Before we dive into the world of nickel, please tell us a bit about yourself and the extensive work you and the team do at the Nickel Institute.

Gary Coates: Sure. First of all, I'm a metallurgical engineer. I got my bachelor of engineering degree at McMaster University in Hamilton, Ontario. I've worked for nearly 25 years in the stainless steel business with a leading stainless steel producer in Sweden. I even lived in Sweden for five and a half years and got my real education there. For the last 25 years, I've been working at the Nickel Institute. Right now, we have four different divisions of it. It's a very diverse global organization.

We have the group that I work with, which is the Market Development Group. We also have the Science Group, which is the Human and Environmental Science Group, and a lot of them are toxicologists. We have a group called Sustainability and Public Policy, which deals with regulators. Finally, the communications group writes the magazine and releases the podcasts we do ourselves, the blogs, etc.

Ed Coyne: Well, it must be fun to be hip now. Nickel has been talked about pretty much in every corner of the investment universe as we talk about battery technology. Let's stay on that for a moment and talk about how Nickel's evolving. Growing up, I thought that nickel was just a nickel, and I was surprised to learn how much copper is in an actual physical nickel, which we don't use anymore. Please talk about how nickel is evolving and its relevance today because it's top of mind in the modern world as we talk about battery technology. Spend some time talking about that, if you would.

Gary Coates: Sure. It was a very expensive metal back at the beginning of the 1900s. One of the uses was coins, as you mentioned. Certainly, in Canada, the nickel was pure nickel. Even today, a lot of the coins in Canada are nickel-plated steel. As you say, we're not using coins so much anymore, but that was one of the more important areas that people saw or came in contact with. We call nickel the hidden metal because it is in many things you don't think of. Two-thirds of all nickel goes into stainless steel still to this day.

You don't think of it. You think of chromium making stainless steel stainless, but nickel gives the stainless steel properties, which means you can form it and easily weld it.

For example, when you're deep drawing your kitchen sink from a piece of metal, the nickel gives it the property where you can deep draw it. As you mentioned, some of the more recent development work has been with batteries, and certainly, batteries are an up-and-growing market for nickel. Most people remember the nickel-cadmium batteries, one of the first ones.

Of course, cadmium is a very bad metal to have, and it has almost been completely banned worldwide as a battery. There are still some around, but the different chemistries of nickel batteries are used primarily for electric vehicles today. Not the only chemistry available, but Elon Musk at Tesla was the big promoter, and even though we called them lithium-ion batteries, he called them nickel batteries because there was more nickel than lithium in them. Today's goal is to have batteries with an even higher percentage of nickel.

Recently, people have talked about a lithium-ion battery with 90% nickel in it. The idea is that nickel contributes a lot of good properties to the driving range, the energy storage property of it. There is interest in it. As I said, there are alternatives, especially in China, where most people don't drive as far as we do here in North America. They use a nickel-free battery there, even in the Teslas they have, the smaller Teslas, because they may only drive 10, 20, or 30 kilometers on an average trip.

Ed Coyne: Well, that's interesting. As far as the higher storage and longer range, that's one of the primary needs for nickel, which allows that battery to be more efficient and store that energy longer. Is that fair to say?

Gary Coates: That is fair to say, and certainly, in North America, we are used to driving long distances. That's very important. You need energy for either heating in wintertime or air conditioning in summertime in most parts of the world. That, of course, drains the battery, too. That's why nickel chemistry batteries are used as the number one source of EV batteries in North America and even Europe.

Ed Coyne: What about the availability or accessibility? Is nickel fairly easy to access for batteries?

Gary Coates: It's interesting. Nickel has been used more and more throughout its history. Maybe 5 or 6% increases every year. That's because there's increasing demand for nickel and stainless steel for nickel alloys and now for batteries. Today, roughly 17% of the nickel produced in the world goes into batteries, whereas maybe five or six years ago, it was 3 or 4%. The processing of nickel from the ore to the final product, where it's needed in batteries, is fairly complicated and fairly expensive. Plants doing that are in the several billion-dollar range to get commercial production. There is enough nickel ore to go around.

We also have to ensure that it's refined in an environmentally acceptable way. Most people think of Sudbury. That's where they practiced the Moon Rover vehicle because it resembled the moon's surface. In the old days, of course, you did allow all the emissions from the operations to go out. Of course, there are extremely significant environmental controls where we don't do that, at least in North America and Europe, and Asia is coming along that way. They were a little bit North America 70, 80 years ago. They're coming along that way. They still have a long way to go in many ways.

Ed Coyne: Let's stay on the refinement side. Often, we talk about metals in general. There are gold and gold mining companies. They're predominantly a gold mining company. Is that true in the nickel, or is nickel a byproduct of other mining? Talk a bit about the mining industry as it relates to nickel.

Gary Coates: Sure. There are two main types of ores. The sulfidic ores that have sulfur in them were the easiest ones to convert to nickel. They also result in a lot of the killing of the environment because they release sulfur dioxide, which creates sulfuric acid in the atmosphere and then kills trees and fish. Of course, that's all been changed now. Those ores were primarily nickel ores. Yes, there was a lot of byproducts with them. Copper was one of them, but precious metals like gold, platinum, and palladium came along, and for some years, the nickel industry made no money on nickel.

They made money on gold and platinum because there was always a high demand for those materials. The other type of ores is Laterite ores, which are oxidic ores and are a little harder to refine. They can be done. One of our companies, Sherritt, has worked with those for many years. In recent years, the Chinese have produced a lower-grade nickel product that can be used in lower-grade stainless steel. That has helped to supply nickel for stainless steel.

With technology that's been recently developed, you can create what we call class one nickel, a relatively pure form of nickel from these Laterite ores, in a very economical way. There is no shortage of the ores; it's just the will to invest the billions of dollars to do that. I should mention in the United States, of course, Mr. Biden wants to have these critical materials that are needed for the low carbon economy done. There's a lot of reluctance to do mining in the U.S. because it upsets the environment somewhat. Just like when you build a house on land, you're changing everything. There has been a lot of reluctance or difficulty to get mines approved, especially in the U.S.

Ed Coyne: Well, you talk about mines and accessibility; what about then on the recycling side? Some metals are more recyclable than others. How recyclable is nickel as a metal?

Gary Coates: It is extremely recyclable, and we'll say 100%. For example, if you have stainless steel that has nickel in it, the value of the scrap that a scrap dealer will pay you is based virtually strictly on the value of the nickel. The more nickel in there, the more valuable it is. Almost all stainless steel that contains nickel gets recycled, and there is a high demand for it. One of the reasons is that the stainless steel market is growing at a rate of about 70% every year, and there isn't enough scrap around to fulfill the world's need for it.

In North America and Europe, most of the stainless steel producers use 100% scrap or want to use 100% scrap, and sometimes they have to use carbon steel scrap and add a little bit of nickel, chromium, and molybdenum to it to make the alloy that they want. Scrap is important, and the stainless steel market will drop slightly. Other countries will have that same-- well, they already have the demand for it, but they don't have the supply of nickels containing scrap.

For example, in China, where they're using much more stainless, the growth there might be 20% per year. They cannot beat it by scrap, but it is important because nickel's value gets recycled. One of the most important parts with batteries is that everybody wants the battery to be recycled, too. All sorts of technologies are being developed for that, which will not be a problem. Again, there's value in it so that it will be done.

Ed Coyne: Well, you mentioned the magic word when it comes to investing: supply and demand. We're seeing this in so many elements in metals right now that the supply out there, although it is available, the demand continues to grow. Starting this podcast today, I didn't think much about stainless steel. Still, you're saying that it's growing both here and abroad and will compete for inventory for batteries, which, as you mentioned, I think was 3 to 4% of nickel use not long ago. Today, I think you said it is over 17. Do you see that continuing to grow as well? Do you see these two demands competing with one another in this space? What would that mean for nickel in the longer term?

Gary Coates: That's a good question. There are a lot of uncertainties about radical technologies that couldn't come along. Everybody is trying to develop a battery that will give that long range and high energy density but is less expensive than the traditional nickel-containing ones. It is possible that something could come along in the next 5 to 10 years that will reduce the demand for nickel-containing batteries. On the other hand, we see just continued growth with stainless steel because we want things to last longer as we think of sustainability.

I'll take an example of our highways where most Department of Transport use carbon steel rebar coated with epoxy today. I know in the Toronto area here, it lasts about 15 years, and then you have to shut down the road, dig up the concrete, and replace the rebar. Stainless steel will last over 100 years, so that's one of the more interesting markets. It illustrates what can be done in the long term if you want components to last long.

Of course, we often think: "Well, stainless steel is more expensive than carbon steel, and it might be four or five times the cost of carbon steel." When you take into account, for example, the rebar, the cost of disruption of traffic, and the costs of repairing, all these costs add up, and it's a clear case for stainless steel rebar in many applications and things like the Champlain bridge in Montreal, a critical bridge across the St. Lawrence River. They put in stainless steel rebar and demanded a 100-year life, which was easy to meet. It was one of those examples where the market for nickel and stainless steel is increasing.

Ed Coyne: You bring up a lot of great points that there's so much diversity in the need and use of nickel that's growing not just in the battery technology but also in the infrastructure globally in our economy. I'd imagine those examples you gave about the highways and rebars are probably true everywhere, not just in North America. Are there any other topics I failed to mention or points you'd like to highlight related to nickel overall?

Gary Coates: We all talk about the low carbon future, how we want the nickel to be used in the energy transition, and that is happening; we need it. For things like geothermal energy down in the Salton Sea in California, it's a very saline liquid from which they get the heat and then can generate electricity. Still, it needs high nickel alloys for that. In solar energy, there's a concentrating solar power where a mirror concentrates the sun's energy. Again, nickel alloys are needed for that. In wind energy, there's a huge demand for all these wind towers that are going up, and people want to build bigger ones with larger turbines on them, and you need a bigger tower.

We have a project going on now whereby adding perhaps 0.5 or 1% nickel to the steel makes it stronger and more fatigue-resistant and gives it many beneficial properties. You reduce the thickness of the towers; the steel in them is maybe 50, 60 millimeters thick or even more. They want to build bigger ones, which will require thicker steel. Again, hydrogen, carbon capture, and sequestration will use nickel and nuclear, which are getting a revival now because they are low-carbon technologies. It uses a lot of nickel already and will use even more in the future as we want the reactors to last more than 25 or 30 years, which was their original design life.

Ed Coyne: Well, it seems like nickel is everywhere. You can't do anything without it, it sounds like. I encourage any of our listeners who want to learn more about Gary and the overall work that the Nickel Institute is conducting and their education series and so forth, I encourage you to go visit nickelinstitute.org and learn more about this fascinating or, as we like to say now hidden metal. Gary, I appreciate you taking the time today to join us on Sprott Radio. Thank you for your time today.

Gary Coates: It's my pleasure. Thank you, Ed.

Ed Coyne: Again, my name is Ed Coyne and thank you for listening to Sprott Radio.