Vietnam has an abundance of high-quality nickel reserves that, in recent years, have become increasingly attractive to international mining companies.

The electric vehicle explosion has engendered soaring demand for raw materials, such as nickel, which is a key component in the lithium-ion batteries that power electric motors. Now, with the combined plans of Australian mining outfit, Blackstone Minerals, and local conglomerate Vingroup, Vietnam is set to become a hub for lithium-ion battery manufacture and even EV production. 

From automobiles to mobile electronic devices, lithium-ion batteries have become the energy storage solution of choice for many manufacturers.

Compared to other battery technology, lithium-ion battery cells are lightweight and have a higher energy density than typical lead-acid or nickel-cadmium rechargeable batteries. As a result, most plug-in hybrids and all-electric vehicles use lithium-ion batteries. 

But from humble beginnings, demand for electric vehicles (EVs) is now soaring, driven by increasingly climate-conscious customers, global green agendas, and sky-high fuel prices. EVs have become increasingly competitive on cost too, with brands such as MG selling their electric offerings for little more than the petrol version.

More battery-production capacity needed

As demand for EVs soar, manufacturers are crying out for more battery-production capacity. The majority of the world’s nickel is currently used in the stainless-steel industry, but that’s projected to change in the coming decades, especially as  EV producers turn to more energy-dense batteries – which typically contain more nickel.

Last year, the Germany-based Center for Automotive Research (CAR) released a report suggesting that battery cell production would not be able to meet demand until 2030. In turn, this will result in an estimated shortage of over 18.7 million electric cars between 2022 and 2029. 

This also means that demand for metals used in the production of batteries, including nickel, has soared. Global demand for nickel has risen steeply over the past five years and is expected to increase to 3.02 million tonnes in 2022, up from 2.78 million tonnes in 2021, according to the International Nickel Study Group (INSG).

With prices going sky-high, miners are stepping up their operations to extract more nickel, but that’s not proving easy. Tesla chief executive Elon Musk has even made public pleas for mining companies to source more nickel and has promised sizable, long-term contracts for those that do. 

Battery makers require Class 1 nickel to produce nickel sulfate – this is a key ingredient used in the production of lithium-ion battery cathodes. Class 1 resources primarily come from nickel sulfide deposits that are quickly becoming depleted. New discoveries are also few and far between. Some producers have looked to nickel laterite, which is mined heavily in Indonesia and the Philippines, as an alternative to the Class 1 material.

While it is more widely available,  the process of upgrading the low-grade nickel laterite for battery production requires extremely energy-intensive processes. As such, its CO2 footprint is many times higher. 

The sensitivity of the nickel market was highlighted earlier this year when the metal’s spot price shot up 250 percent in a day after Russia – which is one of the largest nickel producers – invaded Ukraine. 

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This article was first published by VietnamBriefing which is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in in China, Hong Kong, Vietnam, Singapore, India, and Russia. Readers may write to [email protected].

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ASEAN Briefing features business news, regulatory updates and extensive data on ASEAN free trade, double tax agreements and foreign direct investment laws in the region. Covering all ASEAN members (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam)

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