October 2021
Nickel is an essential alloying element which is predominantly used in the iron and steel industries. According to the Nickel Institute, more than two-thirds of nickel produced globally is consumed in the production of stainless steel.

As an alloying element, the addition of nickel has positive effects on important properties of steel, such as formability, weldability, and ductility, while also increasing corrosion resistance in certain applications. With the growing awareness of and activity in sustainable processes, nickel manufactures are facing growing pressure to improve the environmental profile of their products.

At the same time, as global environmental awareness increases, the demand for nickel in the electric vehicle (EV) sector is also rising. Global demand for nickel for use in batteries alone is expected to rise 18% in 2021 from 2020, backed by strong sales of EVs. As more countries legislate to phase out petrol and diesel cars in favour of EVs, even more attention is turning to the environmental impact of mining and processing the materials needed for EV batteries, including nickel.

 

Hidden Environmental Costs

Nickel deposits are commonly found in low-grade ores (~1-3% nickel), which makes it highly energy intensive to extract and refine the metal. Consequently, nickel production leads to high carbon emissions as well as the use of large amounts of energy predominantly sourced from fossil fuels. In a study conducted in 2014, nickel was ranked as the metal with the 9th highest global warming potential, based on production levels data from 2008. Global nickel production was 1.57 million metric tonnes in 2008 and has since grown to an estimated 2.5 million metric tonnes in 2020. This trend is expected to continue as global demand for nickel continues to rise. AME is currently forecasting global finished nickel demand to rise to three million metric tonnes in 2022, a significant increase from the 2020 and 2021 figures of 2.4 and 2.9 million metric tonnes, respectively.

Nickel is extracted from two types of deposits, namely laterite and sulphide ores. In 2020, the United States Geological Survey (USGS) reported that the world’s identified nickel resources consist of 60% laterite ores and 40% sulphide ores. While the majority of the identified nickel resources are contained in laterite ores, historical nickel production has predominantly been derived from sulphide ores. This unusual difference is mainly due to the challenges of the more complex processing required for laterite ores compared to sulphide ores causing a historical preference for sulphide ores. However, to meet the growing demand for nickel, there is an increasing amount of nickel being sourced from laterite ores, which leads to increasing energy costs and CO2 emissions from nickel production.

 

Emissions Scope

When reporting carbon emissions, many countries and companies have adopted greenhouse gases (GHG) emission standards outlined by the Greenhouse Gas Protocol. This classifies emissions across three scopes:

Scope 1: Direct emissions – emissions released to the atmosphere as a direct result of an activity at company level.

Scope 2: Indirect emissions – emissions released to the atmosphere from the indirect consumption of an energy commodity generated by the company (typically electricity).

Scope 3: Additional indirect emissions – emissions from consumers utilising company output, generated in the wider economy.

Generally, the majority of carbon emissions from nickel production can be attributed to scope 1 emissions.

 

The Breakdown

Skarn Associates reported its global mine production data (excluding China) on carbon emissions along the supply chain at a granular (asset) level covering 2018 and 2019 data. The analysis of the nickel supply chain covers mine sites as well as freight and downstream processing to the first saleable nickel product (class 1 nickel for concentrate producers, and intermediate compounds for others). The result is that the assets covered account for over 37Mt CO2 related to scope 1 and 2 emissions, plus an additional 67Mt CO2 emissions associated with freight to importing country port as well as downstream processing.

In 2020, the Nickel Institute stated that the production of 1t of nickel metal is linked to an average of 13t of CO2 emissions. Approximately 60% of the CO2 emissions are associated with scope 1 emissions, another 15% with scope 2 emissions, and the remaining 25% are mainly associated with process chemicals used during the productions process (scope 3 emissions).

Furthermore, the production of nickel pig iron emits a staggering 69t of CO2 per 1t of nickel content. According to Canadian Sudbury, nickel pig iron could be branded as "dirty nickel" since the production process is not environmentally friendly, it is a highly carbon-intensive process. Meanwhile, ferronickel production emits 45t of CO2 per 1t of nickel content. The primary extraction stage accounts for 87% of total CO2 emissions related to ferronickel production. Roughly 72% of the CO2 emissions are related to scope 1 emissions, another 17% are related to scope 2 emissions, and the remaining 11% are related to scope 3 emissions.

Additionally, the production of 1t of nickel sulphate emits 5.4t of CO2. The main stages where CO2 emissions occur during the nickel sulphate production process are primary extraction and refining, which account for 42% and 35% of the total CO2 emissions related to the production process, respectively. Overall, 67% of the CO2 emissions are related to scope 1 emissions, another 7% are related to scope 2 emissions, and the remaining 26% are related to scope 3 emissions.

Despite the significant carbon emissions resulting from nickel production, this essential metal is not so easily replaced. Moreover, while nickel production by itself is energy intensive, the metal finds its way into a wide range of applications where it significantly reduces carbon emissions during use. For instance, in its usage in EV batteries, it is reported that replacing a gasoline vehicle with an EV reduces overall carbon emissions by 51% over the life of the car. Another example is nickel-containing stainless steel, where nickel enhances corrosion resistance, significantly increasing the product’s life, which limits the demand for manufacturing.

 

The Future is Green

With that said, there is no lack of demand for ‘green’ nickel production. Both miners and EV companies are increasingly trying to secure green-compliant battery materials and are increasingly hesitant to invest in projects powered by coal. Tesla, for instance, has made their stand publicly by appealing to nickel producers to immediately start producing as much “green, efficient, and sustainable nickel as possible”. Alongside its goal to reduce pollution from driving, Tesla is also striving to reduce its own carbon footprint. The major EV company is reportedly in discussions with Canadian miner Giga Metals about developing a low carbon nickel source for its batteries. Tesla’s recent decision to source its nickel supply from BHP Australia was also no doubt significantly influenced by environmental considerations.

On the supply side, Chinese steel and nickel producer Tsingshan vows to be greener in its production. The company has recently announced its plans to build 2,000MW clean-energy facilities at both its Morowali Industrial Park (IMIP) and Weda Bay Industrial Park (IWIP) hubs in Indonesia in the next 3-5 years, including solar and wind power stations and supporting infrastructure. Additionally, Tsingshan also has plans to build a 5,000MW hydropower project in Indonesia to further ensure clean energy supplies, though the exact timeline of this project is unclear.

Russian mining giant Norilsk Nickel, also known as Nornickel, has also made moves to ‘go green’. It claims to have reduced its use of coal-fired energy by 49% in 2016, decommissioned its Norilsk nickel factory, and aims to reduce emissions on the Kola peninsula by 85% by the end of 2021 as part of its global strategy of transforming into an environmentally friendly company. The company also invests in energy modernisation facilities, including the replacement of hydroelectric units at the Ust-Khantaiskaya hydro power plant. The share of renewable sources has thus increased in the company’s energy mix to 55% for the Norilsk Industrial District and 46% for the group.