Axios Pro: Climate Deals

September 12, 2022

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1 big thing: U.S. faces nickel shortfall by 2026

Data: S&P Global Market Intelligence; Chart: Nicki Camberg/Axios

The U.S. will struggle to mine enough nickel to meet domestic sourcing requirements put in place under the Inflation Reduction Act, Alan writes.

Why it matters: The expected shortfall will prevent companies from being able to obtain lucrative tax credits, in turn blunting the impact of the ambitious climate law.

What's happening: The IRA ties some of its biggest tax credits to mandates requiring automakers and others to source most of their clean-energy materials from within the U.S.

  • Nickel is one of those key components. And with just one operating mine in the U.S., the country faces a nickel bottleneck as soon as 2026, when global demand for the material is expected to outstrip supply.
  • Michigan's Eagle Mine (the one nickel mine mentioned above) is set to close as soon as 2024.

Meanwhile: Companies under the IRA can source nickel from outside the U.S., but only if those countries are free-trade partners.

  • That doesn't help much with this particular mineral: The world's top producer of the material is Indonesia (not a free trade partner).

Of note: The IRA includes incentives to encourage more domestic mining. But it takes an average of seven to 10 years to obtain a permit to simply start building a new mine in the U.S.

  • By comparison, the permitting process takes just two years in Canada and Australia.

Bottom line: "We expect robust Indonesian primary output growth to keep the primary nickel market in surplus until 2026, when rapidly growing battery demand is forecast to create a market deficit," Jason Sappor, a senior analyst at S&P Global Commodity Insights, tells Alan.

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