This caused quarterly demand to drop by a drastic 26%, from 74kt in the March quarter to 55kt in the September quarter of 2022. As energy security stabilises and prices cool, demand is expected to recover.

Finished demand will then grow by a CAGR of 3.5% to 311kt in 2027, and by a further CAGR of 4.1% to 523kt in 2040. Demand will remain dominated by the stainless-steel sector, while growth will be supported by battery developments. Europe is fast becoming a hotspot for Gigafactories, with over 30 factories proposed and half a dozen commissioned by the end of 2022.

EVs Driving the Region

Europe’s battery production capacity will partly be fed into its growing EV market, which has reached 20% of total vehicle sales. In 2022, Europe is estimated to have sold 2.6m EVs, equivalent to 24% of global sales.

High inflation rates and a stagnating economy will prevent it from reaching 2021’s record growth. In 2021, European EV sales increased by a staggering 49% to 2.2m, from 1.5m in 2020.

Germany, Europe’s largest EV market, sold 832k units in 2022, following a slow year due to high energy and raw material prices. This is followed by France, who sold 346k units.

Stainless Struggles

Reduced gas and oil imports from Russia due to deteriorating diplomatic relations has forced energy prices to spike. In Belgium, producer Aperam has not resumed production at its Genk plant after the scheduled summer maintenance break, due to the energy intensive nature of the operation. Scrap recycling at Charleroi were curtailed.

Outokumpu also reflected difficulties in adapting, since 45% of its total energy is consumed in stainless-steel production. Fortunately, operations powered by renewable sources have been less affected. The company’s plants in Finland and Germany have been hedged with long term wind contracts, with production remaining relatively stable.

Germany

The largest finished demand source in Europe is Germany, who is forecast to consume 51kt in 2022, a 7.3% drop from 2021 due to reduced stainless-steel production. The biggest plants are in Siegen, Witten and Wetzlar. Mills with lower capacities are also located in Völklingen, Gröditz and Freital. Finished demand will then grow by a CAGR of 8% to 75kt in 2027.

Three large scale battery projects, owned respectively by CATL, Tesla and Northvolt, are expected to be developed and ramped up within this time. Demand will then continue growing at a CAGR of 7% to 181kt in 2040. Growth is expected to be propelled by the battery sector, with new Gigafactories coming online.

Germany is aiming for carbon neutrality by 2045, and to achieve 65% emissions reduction by 2030 compared to 1990 levels. However, the country was forced to recommission and extend numerous coal power stations in 2022 as Russian gas supplies became increasingly unstable. In 2020 Germany emitted 644.31Mt of carbon emissions. The country’s emissions have dropped since the peak of 800Mt in 2016.

Chinese battery giant CATL has commissioned its 14GWh Contemporary Amperex Technology Thuringia (CATT) plant. The EUR1.8bn facility is the company’s first international production facility, and will supply auto manufacturers including BMV, Volkwagen and Volvo etc.

The EV tax credit mentioned in the US’ Inflation Reduction Act is shifting attention away from developments in Europe. Swedish manufacturer Northvolt AB announced that priority may be given to the North American market in the next three years, by postponing construction of the Northvolt Drei Gigafactory in Heide. This may divert finished demand away from Germany.

Production at Drei was originally scheduled to commence in 2025, producing 60GWhpa of batteries. The company has plans to ensure that over 50% of its cells will be made from recycled materials, and to reduce the carbon footprint of a battery cell from an average of 98kg to 10kg by 2030.

Tesla also has an existing factory in Berlin, which was commissioned in March 2022. However, production suffers from continuous quality control and ramp up issues. It was recently revealed that production may be placed on hold, as equipment is being moved to Giga Texas instead.

Italy

The next largest demand source in the region is Italy, who is forecast to consume 47kt of finished nickel in 2022, a 7.5% decline from 2021 due to reduced stainless-steel production. Finished demand will then grow by a gentle CAGR of 1% to 49kt in 2027.

Growth from stainless-steel will be small, while battery development will push demand in the next five years. Gigafactories have been proposed by Italvolt in Sarmagno, and by Stellantis in Termoli. Demand growth will then slow to a CAGR of 0.5%, taking finished demand to 52kt in 2040.

Italy is targeting carbon neutrality by 2050. By 2030, total emissions will reduce by 60%, while the market share of renewable energy increases to 30%. An additional 4m EVs and 2m hybrids will drive on Italy’s roads by then. In 2020 Italy emitted 303.82Mt of carbon from its energy and production activities.

In Termoli, Amsterdam-headquartered auto manufacturer Stellantis will be converting its engine plant into the group’s third European battery plant. Engine production will terminate in 2024, with battery production commissioning in 2026.

Stellantis will source nickel and cobalt sulphate from Alliance Nickel’s (previously GME Resources) developing NiWest project in Australia. The manufacturer is aiming to rapidly scale up production, and to have a total portfolio of 75 EV models, with annual sales reaching 5m by 2030. A hydrogen fuel cell is currently being developed for light commercial vehicles.

Stellatis will strive for zero-carbon by 2038, and to reduce emissions by 50% from 2021 to 2030, with renewables fully powering its operations by then. In 2021, the total carbon footprint of vehicles sold by the company was 136Mt. Of this, only 1.2% came from Scope 1 and 2 sources. 11% came from upstream operations including minerals mining, processing, and transportation.

Apart from battery developments, Italy also hosts Europe’s biggest stainless-steel plant. The facility, located in Terni, is owned and operated by Acciai Speciali Terni (AST), with a production capacity of 1,450ktpa of specialty steels. This includes the austenitic, martensitic and the nickel free ferritic stainless-steels. The company reuses refractories in its production process to partially substitute for lime, which reduces total waste produced by 15-20ktpa.