Indonesia, the world's largest nickel producer, decided to cut production and supply, putting Korea's battery makers on alert. Nickel is a key raw material for ternary batteries, the main products of Korea's battery companies. By contrast, cathode materials firms that secured large volumes of nickel at low prices expect their results to improve.
According to Nikkei on the 4th (local time), the Indonesian government reduced this year's production quotas for nickel miners to 255 million to 270 million tons from last year's 379 million tons. It also decided to implement policies that restrict production and supply, including requiring nickel exporters to keep the revenue they earn in foreign currency on deposit at banks in Indonesia for at least one year.
In the international commodities market, Indonesia's nickel supply restrictions prompted projections that nickel will face a shortage for the first time in five years. The International Nickel Study Group (INSG) forecast that global nickel supply will fall 4% this year from a year earlier.
On expectations of lower supply, nickel prices are also rising. Nickel futures traded on the London Metal Exchange (LME) climbed to about $18,600 per ton as of the 4th. That is more than 40% higher than in early December last year, before the Indonesian government first announced its production cut plan.
With nickel supply shrinking, expense pressures are mounting for Korea's battery manufacturers. LG Energy Solution, Samsung SDI, and SK On, the three Korean battery makers, mainly produce high-nickel ternary batteries such as nickel-cobalt-manganese (NCM) and nickel-cobalt-aluminum (NCA). Recently, the three have also turned to high-nickel ternary batteries with 80% to 90% nickel content.
By contrast, analysts say the rise in nickel prices will be a boon for cathode materials companies such as EcoPro BM and POSCO FUTURE M. If nickel supply tightens, cathode makers can use nickel they bought cheaply to produce cathode materials and deliver them at higher prices. Thanks to the "lagging effect (profit fluctuations arising from the time gap between raw material purchases and oil product sales)," short-term profitability improves.
However, the industry expects that if nickel's uptrend persists for a long period, both battery manufacturers and cathode materials companies will inevitably be hit. Cathode makers, too, will eventually have to procure nickel at higher prices, erasing the lagging effect. If ternary battery prices stay firm, automakers may shift their attention to cheaper LFP batteries, increasing the likelihood of weaker product demand.
A battery industry official said, "In the global auto industry, demand is rising for cost-effective LFP batteries, putting Korean firms focused on ternary products in a tough spot," adding, "Indonesia's restrictions on nickel supply will add to the performance burden on Korea's battery sector."