(Bloomberg) – Elon Musk promises a “giant contract” with the miner that can supply nickel for Tesla Inc. batteries at low cost with minimal environmental impact, yet the sector’s sloppy track record could make this deal difficult to gland.
Recent accidents such as a diesel spill in Arctic Russia and a burst of waste in Papua New Guinea suggest that the sector will struggle to meet Musk’s demand for a large amount of the metal produced in an “efficient” and “environmentally sensitive” way. .
As the world’s most valuable carmaker expands production weapons to China and Germany, the billionaire owner may increasingly have to rely on the biggest supplier of nickel: Indonesia. However, miners are being criticized for plans to pump waste into the high seas, meaning Musk and other manufacturers may have to compromise on sourcing standards while trying to force the sector to clean up its act.
“Nickel projects built in Southeast Asia will rely on coal, fuel oil or diesel to carry out their operations and will leave a huge carbon footprint,” said Sam Riggall, chief executive officer of Clean TeQ Holdings Ltd., which an Australian develops mines to supply nickel for car batteries. “This kind of makes a little mockery of driving a green, sustainable car.”
EVs will account for 58% of global car sales in 2040, compared to 10% by 2025, according to BloombergNEF. Nickel helps store more energy in cheaper and smaller battery packs, allowing EVs to charge faster and travel faster between plug-ins.
Indonesia contains about a quarter of all nickel reserves. To meet the demand of manufacturers, companies are investing in projects that will use acid to process nickel ore too low and produce high quality battery chemicals. The miners plan to dilute the by-products and pipe them to sea – a process known as deep sea waste treatment.
A major shortfall last year, caused by a broken pipeline at the Ramu nickel mine in Papua New Guinea, highlighted the potential dangers of the process.
“The disposed tailings will have a drastic, non-reversible impact on ecosystems, marine and human life,” Alex Mojon, president of the Swiss Association for Quality and Environmental Management, said in a August 11 report on the accident.
Metallurgical Corp. or China, which runs the Ramu nickel mine, declined to comment.
Similarly, EV makers sought to reduce their exposure to Cobalt of the Democratic Republic of Congo due to human rights concerns, they may also decide to stop buying nickel from Indonesian mines with this combination of high-pressure acid seduction, or HPAL, and deep-sea waste disposal, said Benchmark Minerals.
“For new nickel ban, Elon and the battery industry are looking to HPAL in Indonesia,” Simon Moores, founder and CEO of London-based Benchmark Minerals, said in an email. “Yet these methods of deep water referral are increasingly on the same blacklist as illegal DRC illegal artisanal cobalt.”
Tesla did not respond to a request for comment. The Chinese battery maker GEM Co., which together with steel maker Tsingshan Holding Group Co. developing an HPAL project in Indonesia declined to comment. Tsingshan did not immediately respond to a request for comment.
The control is not only concentrated on Indonesia. A massive diesel game at MMC Norilsk Nickel PJSC’s operations in Arctic Russia recently caused public outcry and left the Moscow-based company on the hook for what could be the biggest environmental penalty in the country’s history.
Norilsk Nickel is also one of the world’s largest emitters of sulfur dioxide, a cause of acid rain. The $ 3.7 billion project to capture the toxic gas will not begin until at least 2023.
In the meantime, the company expects the footlights to be brighter.
“There is a tendency to trace the origin of the metal, and in the future the pressure will increase,” said Vladimir Potanin, CEO and co-owner of Norilsk Nickel, in an interview.
Following two fatal waste dams in four years at Vale SA’s Brazilian iron ore mines, the company is using the same infrastructure in its nickel operations in New Caledonia. After heavy writedowns, Vale is in talks to sell the mine to New Century Resources, which is required to invest in an alternative waste storage system.
By compounding the challenges, many of the mines that have been online in recent years have brought financial and technical problems. Analysts including Jim Lennon, senior commodities consultant at Macquarie Securities, say it is doubtful large companies will sign up for new nickel projects while prices are low and the threat of further restrictions on existing holdings is high. Sumitomo Corp. wrote off $ 500 million last month from the value of its Ambatovy mine in Madagascar.
Several junior miners like Giga Metals Corp. and Canada Nickel Co. tell their green references, and their share prices increased as a result. But it is unlikely that they can produce enough clean nickel for EV makers, and put pressure on the mining titans to deliver.
“The sector is focused on these issues because the shareholders, the institutional investors are a lot on it,” Lennon said. “They’re starting to wake up quickly.”
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