Increasing Demand for Batteries Strengthens Worldwide Nickel Market

Estimated reading time: 8 minutes

Indonesia, however, has set its sights on becoming more than just a resource base. The country's Industry Minister, Airlangga Hartarto, has identified a bold agenda. The government's plan is to build Indonesia into a regional manufacturing powerhouse, turning its own raw resources into consumer goods. This strategic move could create even more opportunities for companies already in the country, such as Pacific Rim Cobalt.

The government's goal is not just a grand statement of intent. Plans are afoot to revise labor laws and open up various parts of the economy to foreign involvement. These moves are expected to make the country even more attractive to investors, whose money can drive the development of the manufacturing base.

The abundance of nickel ore will be one of the draws for these investors. This rich resource will remain a unique selling point for Indonesia, as manufacturing within the country appears certain to reduce transport costs associated with acquiring the mineral and allow greater efficiencies in the end-to-end battery production process.

With ongoing demand from China and the development of strong internal markets, nickel companies working in Indonesia almost certainly will see demand for their products continue to rise. By tapping into buried deposits, both Indonesia and the companies operating in the country appear certain to profit. This promising future is what companies such as Pacific Rim Cobalt are banking on.

Pushing Up Nickel Production

Reports from Ivanhoe Mines Ltd.'s Platreef project appear promising. The project's mining team delivered the first high-grade mineralization from underground mine development to surface stockpiles for metallurgical sampling three months ago. A total of fifty grab samples yielded an average grab sample grade of 6.35 grams per tonne platinum, palladium and rhodium plus gold, as well as significant quantities of nickel and copper.

Glencore (OTC:GLNCY), one of the world's largest diversified natural resources companies, has invested heavily in mining for battery metals, including nickel. Producers of some of the world's purest nickel, Glencore relies on assets from Australia, Canada and Europe to produce its supply of nickel. As a byproduct of its nickel production, the company also produces byproduct metals such as cobalt and copper.

The decision by BHP Group (NYSE:BHP) to keep Nickel West was announced by BHP CEO Andrew Mackenzie during a recent mining conference. "Nickel West, which we will now retain in the portfolio, offers high-return potential as a future growth option, linked to the expected growth in battery markets and the relative scarcity of quality nickel sulphide supply," he said. Nickel West is a fully integrated mine-to-market nickel business with all operations (mines, concentrators, a smelter and a refinery) located in Western Australia.

The hunt for battery metals is made more urgent by the work of car manufacturers such as Volkswagen AG (OTC:VWAGY), which began producing cars in China in 1984; the company has become a significant presence in the country since then. Opening two more plants in the country will likely place the company in a strong position in the growing e-vehicle market. VW plans to produce some 70 battery-powered models across its 12 auto brands by 2028 and make 22 million electric cars over the next decade. In addition, the Volkwagen Group opened four new plants in China last year. This growth should boost China's burgeoning battery industry along with the country's demand for Indonesian nickel.

As battery demand continues to grow, so will the world's nickel industry. And the companies involved in that industry appear certain to benefit.

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