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Russia's class I nickel exports

After Russia invaded Ukraine, the three-month nickel price on the LME reached an 11-year high of US$25,575 per tonne. The reason is that Russia supplies around 20% of the world's Class I nickel.

For newcomers to the nickel market, it's important to know that there are two main types of nickel: While Class II nickel is expected to see continued oversupply this year as more of China's HPAL projects come online (primarily in Indonesia), Class I supply is tightening, just as electric vehicle and electric battery demand is rising dramatically. According to the International Nickel Study Group, "The implicit market balances are therefore a deficit of 169kt in 2021, and surpluses of 105kt in 2022 and 239kt in 2023. Historically, market surpluses have been linked to LME deliverable/class I nickel, but in 2023 the surplus will be mainly due to class II and nickel chemicals (principally nickel sulphate)."

Before the Ukraine war, Nornickel had plans to expand the Harjavalta refinery capacity to 75,000 MT/year and 100,000 MT/year by 2026. Instead, the company is now looking at a 10% production cut this year as Europeans seek alternate sources.

Meanwhile, EV sales continue to ramp up. According to the International Council on Clean Transportation, a variety of incentives for automakers and consumers, design improvements and efficiencies mean EVs could reach price parity with gas powered cars this year, which is as much as five years sooner than many analysts forecast. Consumer sentiment regarding EVs has also been accelerated by the "price at the pump" spikes in recent years. While regional adoption rates vary, global sales of new EV already sit at 13%, and are expected to hit 55% by 2030.

Considering the role that Class I nickel plays in most EV battery chemistries, this is good news for nickel consumption over the long run.

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