However, in order for the vehicle to qualify, it must have sourced a minimum of 40% of its materials domestically, or from the 20 countries that the US has free trade agreements with. This requirement may even be bumped up to 80% by 2026.

This policy is, in part, a reaction to Russia’s invasion of Ukraine and its repercussions on global supply chains. Energy transition efforts will continue to drive the EV revolution in the foreseeable future, but the expansion of this sector amidst wavering global energy security and class 1 nickel supply is proving to be a massive headache for EV producers. Moreover, increasingly protectionist policies for critical minerals, tougher and stricter than the IRA, will provoke an era of deglobalisation as the world fragments intro trading blocs.

The US Energy Transition

Decarbonisation efforts in the US have been relatively effective in the past 15 years, taking emissions from a peak of 6.0bnt in 2007 down to 4.9bnt in 2021. By 2035, the country aims to be completely reliant on renewable energy, and to achieve carbon neutrality by 2050.

The Infrastructure Investment and Jobs Act of 2021 dedicated US$1.2tn to green energy developments. Of this, US$3.5tn will be used to improve the energy efficiency of low-income households, while US$7.5tn will also be used to establish a proper charging network for EVs. The power grid will also be updated with smart designs.

Additionally, as part of the Bipartisan Infrastructure Law, a total of US$2.8m in grants will be awarded to critical mineral projects to expand domestic EV battery capacity. The Department of Energy estimates that the grants will be enough to jump-start enough nickel producing projects for the production of 400kpa EVs, enough lithium for 2Mpa EVs and enough graphite for 1.2Mpa EVs. US$42m in grants have also been released to fund 12 university projects in sustainable battery development.

Demand Growth

Finished demand in the US is forecast to continue recovering this year, growing by a gentle 3.5% to 130kt in 2023. Demand saw a significant dip in 2020 and 2021 due to pandemic induced lockdowns. Energy and material supply disruptions in 2022 also pushed up inflation rates, restraining demand growth.

Expansions in the EV sector, incentivised by tax credits under the IRA, will support strong finished nickel demand recovery as the US attempts to domesticate battery materials production. China’s monopoly on critical minerals production will weaken.

Demand will then grow by a stronger CAGR of 8.0% to 223kt in 2030, as battery precursor material plants and gigafactories come online. Growth will remain dominated by EV developments. By 2040, finished demand will reach 510kt, following a slightly stronger CAGR of 8.6%. The US will overtake Japan to become the third largest source of demand, while exhibiting the strongest growth as its domestic battery material production capacity balloons.

All finished demand relies on imports, predominantly from Canada, which accounts for over 40% of total imports, as the US has no nickel refining capacity. Moreover, its sole producing nickel mine will deplete in the short term. Over 76% of imports are class 1 nickel, used in its automotive and manufacturing industries. While 14% of imports are in the form of ferronickel, which will be used in stainless-steel production.

Major Players

Tesla, the largest American EV manufacturer, has signed a whopping US$5bn nickel supply agreement with Indonesia to manufacture its next generation of EV batteries. It is also rumoured to be considering the construction of an EV plant in Indonesia, although this has not been confirmed. The company currently has five gigafactories around the world, including the Nevada, New York and Texas plants in the US, and the Shanghai and Berlin factories.

During Tesla’s Battery Day presentation, the company highlighted that it will be prioritising the replacement of cobalt with significantly cheaper and conflict-free nickel in its future batteries. Additionally, the production process will become increasingly integrated.

The company intends on refining class 1 powder instead of purchasing nickel sulphates to reduce production costs. The proportion of recycled materials used will also gradually increase as availability increases. Tesla will also be predominantly relying on nickel ores mined domestically, or from its neighbour Canada.

General Motors (GM) will be sourcing 25ktpa of nickel in sulphate from Vale Canada’s proposed plant in Bécancour when it comes online in the second half of 2026. This will be enough to manufacture 350kpa of EVs.

A proposed cathode materials plant is also in the works as a joint venture between GM and POSCO. While battery materials will be sourced from POSCO Chemical’s Gwangyang facility in South Korea in the meantime.

GM has also signed an agreement with Queensland Pacific Metals (QPM) for the supply of nickel and cobalt materials from its proposed TECH project in Australia. This will be used to produce GM’s in-house developed Ultium cells, which are based on a nickel cobalt manganese aluminium chemistry that will provide a high energy density while reducing cobalt consumption by 70%.

GM is targeting to produce 1m EVs in North America and China by 2025 and to overtake Tesla as the largest EVs manufacturer. Four battery plants will be constructed through its JV subsidiary with LG Energy Solution, Ultium Cells LLC by 2025 to accommodate this.

Finished demand also originates from the stainless and special steels sector. Major steelmaker Cleveland-Cliffs is the largest North American producer of iron ore pellets. Stainless-steel producing facilities are located in Butler and Mansfield. While cold rolling and finishing lines are in Rockport, Zanesville and Coshocton Works.

The company’s operations are highly integrated, mining its own metallurgical coal and iron ore needed for production. However, nickel feeds are still acquired from third parties due to the lack of finished nickel produced domestically.

Domestic Supply

Lundin Mining’s Eagle Project in Michigan is the only producing nickel mine in the US. Ore from the mine is trucked to the Humboldt mill and processed into 17.3ktpa of nickel in concentrate on average. This is then exported to smelters in Canada, Europe and Asia for processing.

Mine life has been extended from 6 to 11 years upon the discovery of the Eagle East deposit 2km from the main orebody. A third deposit, called Keel, will commence production in 2024 to further extend mine life. However, the operation is scheduled for closure in the short term, when Keel depletes.

The push to regain control of the nickel supply chain has encouraged a flurry of exploration project developments. Talon Metals is currently advancing the Tamarack project, which will supply 75kt of nickel in concentrate to Tesla over six years if the project is commissioned by 2026.

While PolyMet Mining has formed a joint venture with Teck Resources to combine their respective NorthMet and Mesaba deposits. The new company, called NewRange Copper Nickel, will share exploration capital and processing facilities between the two sites.

However, the development of new mines on American soil faces strong community pushback due to environment concerns. A 20-year mining ban placed on Minnesota’s Boundary waters region has placed Antofagasta’s Twin Metals project indefinitely on hold.