China ‘tweaks’ nickel taxes to favour EVs, Wood Mackenzie says

In December, China made adjustments to import taxes on some nickel products that favour the production of electric vehicles (EVs).

On Jan. 1, the import tax on nickel sulphate — a key ingredient in lithium-ion batteries — was slashed to 2% from 5.5%, Wood Mackenzie says in a new report, while the tax on imports of nickel cathode for smelting purposes jumped from 1% to 2% (but it remained at the lower end for cathode more suited to plating and sulphate applications).

“With local sources pointing to the fact that over 60% of imported nickel sulphate is used in the production of ternary materials for NCM/NCA batteries, it is evident that China is laying the ground to support her capabilities in this field,” Wood Mackenzie says. (Lithium-ion batteries are composed of three parts: NCM batteries contain nickel, manganese and cobalt oxide, while NCA batteries contain nickel, cobalt and aluminum oxide.)

Subsidies in China for electric cars that have greater ranges complement the Ministry of Finance’s latest tweaks to the nation’s import taxes, Wood Mackenzie says. A new policy in the last week of 2017, for example, ended subsidies on EVs with driving ranges of less than 150 km. However, subsidy programs remain in place through 2020 that offer financial support for EVs. The first is available for cars with ranges of up to 300 km, and a second, higher subsidy is available for cars with a range greater than 400 km.

Under a new dual-credit scheme that is supposed to go into effect in April, carmakers will be rewarded or penalized based on the car manufacturer’s fuel consumption and driving range, Wood Mackenzie says in a separate news release on Jan. 19. “If an automaker does not produce any EV, it will need to purchase EV credits from an EV maker to meet the government’s goal. Those with surplus credits can sell them in the market.”

Minara Resources nickel processing plant at its Murrin Murrin nickel-cobalt laterite mine in Western Australia. Credit: Minara Resources.

In addition, Beijing has raised minimum power-to-weight requirements from 90 W/kg to 105 W/kg, with the full subsidy only applying to electric vehicles with 140 W/kg.

“Encouraging automakers to produce vehicles with longer ranges translates into using battery types containing a higher nickel content,” the research and consultancy group says. “This dovetails well with the reduced import tax on nickel sulphate from the start of 2018.”

China has overtaken the U.S. as the world’s largest EV market, and Wood Mackenzie says the country’s EV penetration rate is projected to hit 17% in 2035.

In addition, Beijing has also raised minimum power-to-weight requirements from 90 W/kg to 105 W/kg, with the full subsidy only applying to electric vehicles with 140 W/kg.

“Encouraging automakers to produce vehicles with longer ranges translates into using battery types containing a higher nickel content,” Wood Mackenzie says. “This dovetails well with the reduced import tax on nickel sulphate from the start of 2018.”

“With China already scouring the globe for nickel units suitable for battery and chemical applications, we have seen the initial attempts of several western nickel producers to make such products more available, often at the expense of their more customary products (eg., powders or sulphate, rather than briquettes). But this will take time to advance,” Wood Mackenzie says. “Meanwhile, the London Metal Exchange (LME), recognizing the price pressure now falling on consumers of nickel chemicals, is assessing the feasibility of introducing new contracts dedicated to nickel [and cobalt] sulphate.” (The consulting firm expects a decision by the LME will be made this year, in time “for a 2019 launch.”)

“As we wait for this to become a reality, we can expect continued disparity between the market conditions for melting grade nickel products and those for plating/battery chemicals, as reflected in regional spot premiums,” the report continues. “Contract premiums for both product sets, compared with 2017, have already flared out for 2018 across all regions, but the move up for chemicals has been sharper.”

In the meantime, China’s top nickel producer, Jinchuan Group Co., told Bloomberg that it expects to raise nickel sulphate production to 70,000 tonnes this year from 50,000 tonnes in 2017. The company also told the news agency that it would keep production of nickel cathode, used in stainless steel, at 135,000 tonnes in 2018.

Jinchuan also said it would increase cobalt production from 10,000 tonnes in 2017 to 11,000 tonnes this year.