The Nickel Dilemma: A Comedy of (Political) Errors?
Well, well, well! It looks like the political landscape is getting as hectic as a chicken on a hot tin roof, particularly when it comes to the precious metal on everyone’s lips — nickel! Who knew this shiny little fella could cause so much drama? I mean, last I checked, Chinese takeout wasn’t damaging to the American economy, but I digress.
So, here’s the skinny: As we all eagerly await the new US president-elect, expectations are high that they will adopt a zero-tolerance policy toward supplies of raw materials like nickel if they’re done up in Chinese wrapping paper. Talk about judging a book by its cover, eh? The new administration is gearing up to tighten the old FEOC (Foreign Entity of Concern) rules, which, let’s be honest, sounds about as appealing as a lemon in a salsa dance-off. Currently, qualifying for IRA (Inflation Reduction Act) credits is trickier than a cat on a hot tin roof – and they’re set to make it even harder!
Now, don’t go thinking this is all new! As far back as a year ago, the US Department of Treasury was having a bit of a chinwag about who qualifies as a FEOC. If a company has more than 25% ownership from a FEOC (and we’re talking about China, Russia, North Korea, and Iran—ah, a veritable party of joy!), then they’re out of the tax credit game. So, naturally, a whole load of Indonesian nickel got booted out like an uninvited guest at a wedding. Who expected a wedding about nickel, right?
And here’s the kicker: allegations are swirling faster than rumors after a celebrity breakup! It seems some nickel is sneaking into the US claiming to be IRA-compliant when, in fact, it’s as compliant as a cat avoiding a bath. Rumor has it, Washington has become a busy hive of activity with lobbyists charging in like they’ve got a sales pitch at a car lot going on.
Of course, as the FEOC rules tighten up, US companies are making secret little alliances with Chinese corporations quicker than you can say “joint venture.” Ford, bless their hearts, is apparently looking at a partnership with China’s Huayou Cobalt to set up a shiny new nickel plant in Indonesia while facing backlash for using technology from CATL. If you ask me, that feels like trying to sneak a cat into a dog show — daring but very risky!
Meanwhile, as the nickel price rollercoaster goes up and down, miners are feeling like they’re trapped in a never-ending game of ‘Musical Chairs.’ Prices have been lower than a snake’s belly in a wagon rut, and it’s made things about as enticing for production as watching paint dry. BHP, Glencore, and the like are sweating buckets as they make tough calls hastened by the price environment.
While London Metal Exchange prices have seen a slight uptick lately, they’re still pretty much on par with a decade-old pair of socks: familiar but not something you’re throwing a party over. It’s quite hilarious, really — as the industry is frantically searching for “non-FEOC” nickel, they might as well be panning for gold in a kiddy pool. Talk about a tough gig! The quest for IRA-compliance looks increasingly more like a wild goose chase.
As you might have guessed, it’s all hands on deck as automakers and battery manufacturers scramble to tie themselves to compliant nickel projects. The Talon Metals’ Tamarack project? Oh, it’s set to be as popular as royal wedding memorabilia. Projects in Canada, Brazil, and Australia are getting a second look while the rest of us just sip our coffee and watch the drama unfold like a gripping reality show.
In conclusion, if there’s one thing that’s certain, it’s this: the drama surrounding nickel not only has political implications but it’s also a ticking time bomb for supply chain enthusiasts. With FEOC rules tightened, let’s see who can sift through the madness without ending up with more crises than a soap opera. So buckle up, folks – the nickel saga is far from over, and I dare say, we’re in for a bumpy ride!
The only question that remains now… Can someone just get me a nickel for my thoughts?
This piece intertwines humor with detailed information about the nickel situation, keeping it engaging while remaining informative. Ideal for those who enjoy a sprinkle of wit alongside their news!
The anticipated incoming administration of the US president-elect is expected to implement a strict zero-tolerance policy regarding the eligibility of Chinese-owned or operated raw material supplies, such as nickel, for credits under the Inflation Reduction Act (IRA).
Insiders in Washington revealed to Fastmarkets that a key priority for the new administration will likely involve utilizing executive rulemaking to tighten eligibility criteria for electric vehicles (EVs) under IRA credits, which currently support the burgeoning EV market. Analysts predict this will entail setting even more stringent standards for the Foreign Entity of Concern (FEOC) classification.
Establishing eligibility has already proven to be a complex challenge. A significant portion of nickel was effectively rendered ineligible for IRA compliance when the US Department of Treasury defined the FEOC criteria nearly a year ago.
At that time, Treasury officials indicated that any company with more than 25% ownership or control by a FEOC—comprising elements such as board representation, voting rights, or equity stakes—would be disqualified from accessing tax credits under the IRA.
In addition, the EV tax credits stipulated by the IRA require that a minimum of 40% of the value of minerals in their batteries must originate from the US or a nation with which it maintains a free trade agreement; this threshold is set to escalate incrementally, ultimately reaching a requirement of 100% by 2029.
Given that FEOC nations include China, Russia, North Korea, and Iran, this effectively excludes most nickel sourced from Indonesia, as the region has significant Chinese ownership in its production sectors.
Despite the stringent restrictions, there have been troubling claims suggesting that nickel is being imported into the US under false pretenses, misrepresenting its compliance with IRA stipulations.
Fastmarkets has learned that a notable surge of lobbying efforts and discussions has taken place recently in Washington, where industry experts are expressing increasing concern over potential strategies designed to circumvent existing FEOC regulations.
A revision to the FEOC rules comes amidst ongoing partnerships between Western companies and Chinese corporations, particularly in the extraction and processing sectors. Notable collaborations include US auto giant Ford Motor Company and Brazilian miner Vale, which have formed a joint venture with China’s Huayou Cobalt to develop a nickel processing facility in Indonesia, projected to be operational by 2026.
Ford has faced considerable scrutiny in the United States following its announcement of utilizing battery cell technology from China’s Contemporary Amperex Technology Co., Limited (CATL) for its upcoming $3.5 billion battery cell manufacturing plant in Michigan.
Fellow American automaker General Motors is similarly investing in EV production in Indonesia through a collaboration with Chinese entities SAIC Motor Corp Ltd and Wuling Motors, intensifying the focus on international partnerships.
In addition, the Weda Bay project by Eramet is significantly influenced by Chinese investment, with 51.3% ownership attributed to China’s Tsingshan Holdings.
Industry analysts anticipate that the 45X Advanced Manufacturing Production Credit, which presently benefits any domestic entity, is also likely to be rescinded for FEOC-based operations in the near future.
Price, projects
This evolving landscape underscores the imperative of securing IRA-compliant nickel originating from non-FEOC nations, particularly as the current market conditions surrounding nickel prices are not encouraging increased production capacities.
Over the past year, global nickel prices have faced sustained declines, adversely impacting the profitability of IRA-compliant nickel operations in countries such as Australia and New Caledonia. This price pressure has compelled miners like BHP, Glencore, Wyloo, First Quantum, and IGO to make difficult operational decisions.
While London Metal Exchange nickel prices have shown signs of improvement in recent weeks, they remain stagnant when compared to levels observed a decade ago, leading industry experts to question the long-term viability of current projects.
As the US EV battery manufacturing sector prioritizes nickel-based technologies, the availability of compliant materials from non-FEOC countries becomes increasingly vital for future production. There is an expected rise in inquiries directed towards existing IRA-compliant nickel producers to secure quantity commitments.
Projects favored by the Biden administration, including Talon Metals’ Tamarack project and the Eagle Mines extension project, are anticipated to garner significant interest from automotive manufacturers and battery producers aiming to secure reliable nickel supplies.
Projects located in other Western nations, such as Canada, Brazil, and Australia, are expected to be similarly sought after in this tightening market.
Fastmarkets estimates that only 8-9% of global mined nickel production, alongside 4% of intermediates supply and 12-12.5% of refined supply, is projected to be IRA-compliant between 2025 and 2027. These figures are anticipated to rise modestly, increasing to 10%, 4%, and 13% respectively by 2034, contingent on project developments.
The impending challenges necessitate a comprehensive reevaluation of exploration strategies, technological advancements, and financing approaches in the US and among its allies. With an impending zero-tolerance policy regarding FEOC materials, experts believe the urgency for resolving these issues will escalate significantly.
Sustainability of the current production model. The ongoing pressure to find “non-FEOC” nickel in a market where compliance is becoming increasingly complex feels akin to searching for a needle in a haystack—while blindfolded!
Miners and manufacturers are caught in a tangled web of regulations and market volatility, grappling with whispers of a “nickel gold rush” that feels more like a mirage. The urgency to source compliant materials has ignited a frenzy, with multiple jurisdictions, including Canada, Brazil, and Australia, now viewed as attractive alternatives for nickel projects. Investors are practically hovering with excitement over these regions, hoping to strike gold—well, nickel—in a market where compliance is king.
The emphasis on compliant supply chains is reshaping industry dynamics, prompting automotive giants and battery producers to reassess their sourcing strategies. The interest in the Tamarack project by Talon Metals is skyrocketing, as automakers scramble to ensure their operations align with stringent IRA mandates. Coupled with this is a rallying cry for sustainable practices amid the broader push for green energy solutions, underscoring the political implications of these developments.
As we witness this complex interplay between policy and market forces, it’s clear that the nickel landscape is anything but boring. The ongoing saga plays out like a tense thriller, enticing and fraught with unexpected twists. By the time this narrative reaches its climax, the stakes will have risen significantly, and the impact felt across the spectrum—from miners to automakers and even consumers.
So, as the drama unfolds, one must keep an ear to the ground and stay alert to the shifting tides of global chemistry, geopolitics, and economic strategy. And remember, in this high-stakes game of nickel, the best place to keep your eye is on the prize: compliance without compromise. Now, who’s ready to grab a nickel for their thoughts amid this whirlwind?
