May 2021
Nickel production has always been relatively expensive. In all the excitement of the China commodity boom up to 2014, nickel projects suffered from very high capital intensities—the project capital cost divided by the nameplate contained nickel capacity.

These costs were then compounded by ramp-up issues that have seen many large-scale projects fail to ever reach nameplate capacity, driving up their realised capital intensity. Subsequently, part of the legacy of these projects is that few large projects were approved. The exception has been new RKEF process capacity for producing low grade NPI in China and then Indonesia. With forecast demand growth expected to be boosted by the rise of electric vehicle batteries—and the quality of finished nickel products required—is the accepted capital intensity going to rise?


Horses for Courses

The viability of nickel projects can be slightly confused due to the range of products produced and the vast array of processing routes to get there. Nickel products for producing stainless steel do not have the same requirements as nickel to feed a nickel sulphate process. Additionally, the nickel ore type being process will also impact the capital costs of the processing plant. A higher capital intensity can be tolerated if they are producing a higher quality/more value-added product—a key consideration as producers increasingly look to supply the battery sector.

Broadly speaking, nickel ores sourced from sulphide deposits can be processed in a relatively conventional hydrometallurgical concentrator/flotation circuit to produce a concentrate before being smelted to a nickel matte. As these deposits have become rarer, with few major discoveries and several large, older mines reaching end of life, attention has shifted to laterite ores. Laterite ores can be more technically complex and energy intensive to process and also saw the rise of High-Pressure Acid Leach (HPAL) plants.

A raft of large nickel projects was developed from the early 2000’s and came online between 2010 and 2015, including a number of large pyrometallurgical ferronickel and HPAL projects to meet growing consumption in China—this was primarily to supply the stainless-steel sector. However, the time required to develop and realise these large projects was too long for China to wait which has seen the rise of nickel pig iron (NPI). NPI of sufficient grade for standard stainless steel can be produced cheaply with laterite ores from small scale blast furnaces and Rotary Kiln Electric Furnace (RKEF) processes at very low capital intensity.


The Upper End of Capacity Costs

At the other end of the ledger, large-scale, new finished nickel capacity has been added in large and very high-profile tranches of 30–60ktpa at a time by the major producers through projects such as Koniambo, Vale New Caledonia (VNC; formerly Goro), Ambatovy, Long Harbour and Onça Puma. These large new projects, predominantly HPAL and sophisticated ferronickel operations established to process laterites, developed a negative reputation for rapidly escalating capital costs during construction, delayed deliveries, and poor ramp-ups following construction.

HPAL’s take around 4 years and have had an average capital intensity of ~US$65,000 per tonne of contained nickel. However, the raft of large projects coming online between 2010 and 2015 all had capital intensities more than US$40,000/t of contained nickel. Following delays and cost blow outs, several projects were pushing US$100,000/t. With the high volatility of nickel prices, many of these plants can easily find themselves in tough times.

This suite of projects also came online during/after a rapid build-up of Chinese NPI capacity which had essentially pushed nickel to surplus, largely riuining the financial case for the large developments. Prior to Indonesia’s export ban, China imported ore to process at NPI capacity it developed domestically, to feed its steel mills. However, with the announcement of an ore export ban, virtually all attention turned to Indonesia.

The current frontier of nickel developments is almost solely focussed on Indonesia with its vast lateritic ore reserves which now have to be processes domestically. With the ore export ban timeline announced, Tsingshan, the world’s largest stainless-steel producer shifted its nickel capacity development plans to Indonesia, constructing significant NPI capacity using comparatively cheap RKEF technology.

Compromising on nickel content in the final product the technology has a very low capital intensity, in the order of US$10-20,000/t of contained nickel. Producing NPI with only 8-15% contained nickel, it is a relatively rubbish nickel product in the scheme of things but acceptable for producing (lower quality) stainless steel.

They were also followed by Delong, the now second largest producer of NPI in Indonesia. Both now ship low nickel content NPI to their mills in China and to stainless steel production capacity which has also been developed in Indonesia—though to the displeasure of competitors in China and the Chinese Government.



The rise of electric vehicles will drive an increasing demand for higher quality nickel products for producing battery chemicals. While demand from the stainless-steel sector, for which lower quality nickel is acceptable, will continue to dominate finished nickel demand, the uptick in demand from the battery sector is expected to force a rethink of nickel processing capacity technology.

The higher value of better-quality nickel products will bring the larger, more complex circuits back into viability. We have already seen three HPAL’s enter development in Indonesia.


Will New Capacity Be Any Different?

Some of the heat appears to have come out of the capital costs for nickel developments. While previous projects such as Ambatovy have their capital intensities pushing US$100,000/t, one of the most recent, the Gordes HPAL in Turkey was developed with a capital intensity of ~US$36,000/t.

The newest HPAL projects, being developed in Indonesia, are claimed to have a capital intensity as low as ~US$15,000/t—the PT QMB New Material plant was reportedly budgeted at US$700m for a 50ktpa plant—though the reality of this figure is rejected by pretty well everyone. It is expected a HPAL plant with capital intensity around US$40,000/t, producing higher value nickel products for the battery sector is a viable prospect.

The most recent development in the nickel processing sector is Tsingshan’s nickel matte production process. Looking to leverage off its significant RKEF capacity in Indonesia, the group has developed a nickel matte production process utilising its NPI as a feedstock. The concept allows Tsingshan, and associated producers a degree of flexibility in product mix. This allows it to cater to the ebbs and flows within the nickel market and has the potential to largely close the processing gap between stainless- and battery-grade nickel products.

Compared to a new HPAL plant or a more complex ferronickel circuit processing laterites—existing plants with capital intensity of US$60-100,000/t—Tsingshan’s technological development is understood to be comparatively very cheap with modifications to existing RKEF lines being as cheap as US$1m per line which has a capital intensity of only $20,000/t to start with—potentially throwing a spanner in the works of a larger scale plant’s development viability. Including the HPAL’s in which Tsingshan is already involved in Indonesia—though these are expected to produce mixed precipitates or even, eventually, nickel sulphate directly.

If Tsingshan’s nickel matte technology role out is a success, other processing routes may become less viable, placing downward pressure on what is currently an acceptable capital intensity for a new project to process laterites. Sulphide developments are expected to remain viable but major prospects are thin on the ground.


Not Just Dollars

Beyond the straight financial cost, the environmental cost of materials will play an increasing role in consumer considerations. While nickel production, particularly from  laterite ores, is an energy intensive process, Tsingshan’s nickel matte is especially so as its basically a double pyrometallurgical process route.

In the pursuit of a ‘green economy’ and how EV’s fit within it, the very high carbon emissions anticipated from Tsingshan’s nickel matte production may be an issue, particularly for western vehicle producers and importers. This may see the embrace of Tsingshan’s nickel matte limited and maintaining a development pathway for comparatively higher capital intensity projects.