Nickel Industries boss would welcome a green premium, but EV industry won’t pay it

Electric vehicle and battery makers are not prepared to pay a premium for low carbon nickel production, according to Nickel Industries boss Justin Werner.

Electric vehicle and battery makers aren’t prepared to pay a premium for “green” nickel, according to Nickel Industries boss Justin Werner, although the Indonesian nickel producer says the company would welcome one.

Nickel Industries posted record underlying earnings on Thursday, on the back of record production and despite significantly lower nickel prices.

The company owns an 80 per cent share in a group of nickel kilns in Indonesia, along with an associated mine and a minority stake in two high pressure acid leach (HPAL) processing plants.

The Indonesian producer’s statutory net profit fell 23.5 per cent to $US121.6m in 2023. But its group earnings before interest, tax, depreciation and amortisation rose to a record $US403.3m, from $US339.2m in 2022.

The company said it produced a record 131,126 tonnes of nickel metal.

Indonesian nickel production has been tarred with the tag of being “dirty” production by Australian miners under threat from plunging nickel prices, largely caused by the flood of cheap supply from their Indonesian rivals, who benefit from cheap power via coal-fired plants.

A premium for low carbon nickel production is one of the options being floated by Australian producers.

But Mr Werner told analysts on Thursday there is no sign that end users – including electric vehicle and battery manufacturers – are prepared to pay a premium for low carbon output, although he said Nickel Industries would welcome such a premium if it was available.

The company currently owns 13.75 per cent of the Excelsior nickel and cobalt (ENC) HPAL project in Indonesia, but will move to a 55 per cent controlling interest in the project over the next two years. When finished, ENC will produce 72,000 tonnes of nickel a year – including the class one nickel suitable for use in electric batteries.

“We would absolutely welcome a green premium. We’re targeting our ENC HPAL to be the lowest carbon intensive nickel units globally – 60 per cent of the power for that will be generated from the heat from that sulfuric acid plant and from a solar plant, and our mine is an ESG leader in Indonesia,” Mr Werner said.

“We would absolutely welcome it. But will it come to fruition? I think not. We’ve been engaging with a number of electric vehicle and battery makers and they’re just interested in cost.”

Mr Werner said the slowdown in the uptake of electric vehicles had made car makers far more focused on cost, and that major manufacturers were “comfortable” with Indonesia’s ESG credentials.

“You only have to look at the names that have invested already in the country – you’ve got Ford, BASF, Hyundai, LG and Volkswagen,” he said.

“Really there actually isn’t going to be that any difference between nickel mined in Australia and nickel mined for an HPAL in Indonesia and so this whole concept of a green premium is not going to come to fruition. And, importantly, it’s the end customer who are the ones that are saying they would be unwilling to pay it.”

Nickel Industries declared a 2.5c a share final dividend on Thursday.

The company’s shares closed down 1c to 70.5c.