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Delayed Quote. Delayed London Stock Exchange - 09/19 11:35:19 am
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Electric ambition: BHP eyes EV market with speciality chemicals

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08/02/2019 | 11:22am EDT
BHP Group Nickel West Asset President Eduard Haegel poses at the Kwinana Nickel Refinery, south of Perth

KWINANA, Australia (Reuters) - BHP Group will face a test of its ability to move beyond bulk mining over the coming year with a foray into specialty chemicals for the battery industry at its once struggling Nickel West division.

The global miner said on Friday it plans to start production of nickel sulphate in the second quarter of next year, a higher value, higher purity product for sale to customers throughout the electric vehicle (EV) supply chain.

The move by the world's biggest bulk miner - best known for iron ore and coal - underscores its efforts to position itself for a decarbonised world, which already relies on copper, another of its core commodities.

Nickel West, which comprises mines, a smelter and a refinery producing nickel as powder or briquettes, is building what BHP expects will be the world's largest nickel sulphate facility to provide material for lithium-ion batteries.

Having tried for years to sell the business, its turnaround under the stewardship of Eddie Haegel has made it something of a poster child for efficiency within the company, according to one investor. It was elevated to "core" for growth in May.

But analysts and industry experts say it faces challenges, not least moving BHP from a high volume, low cost producer of bulk commodities to a producer of top quality chemicals demanded by battery makers, and worries about short-term demand.


Nickel's medium term outlook is bright, driven by an expected boom in electric vehicle sales and a move towards nickel-rich batteries that can store more energy, giving a longer drive between charges.

Demand for nickel from the battery supply chain is expected to double to 400,000 tonnes by 2025 from 200,000 tonnes this year, according to Wood Mackenzie, which is around 8 percent of the current global nickel market.

In the short-term, however, an end to some of China's EV subsidies in June has dampened demand throughout the EV battery supply chain, particularly for lithium.

BHP's new production, which is equivalent to 22,000 tonnes of nickel or 100,000 tonnes of sulphate, will add around 11 percent to the market just as other sulphate producers also start or raise output, including Indonesia's QMB New Energy Materials, Papua New Guinea's Ramu and Finland's Terrafirme.

First Quantum said this week it would restart its Western Australian Ravensthorpe nickel operations by Q1 2020 to produce a mixed hydroxide product (MHP) that is cheaper to turn into battery chemicals.

BHP's Haegel, says the miner will aim to match supply with demand and would flexible in what was "a very new, a very young market".

The miner was also confident it tap into its expertise in bulk products.

"We think that integration is a competitive advantage, we think scale is a competitive advantage," Haegel told a briefing at the plant on Friday.


As battery makers move towards higher nickel-content cathodes, they look for extremely high purity metal. One seller of nickel sulphate, based in Asia, said that BHP's existing metal products were not first choice for his customers because they took longer to process.

"BHP Nickel briquette or powder is not a first purchase option for the nickel sulphate producer in Northeast Asia... It takes more time to solvent (which leads to) less productivity and higher cost," he said.

Haegel acknowledged that BHP had received similar feedback that may be related to the density of BHP's briquettes.

"That hasn't stopped people buying briquettes – sales continue to grow," he said.

"All I can point to is that we have had pretty exponential growth in our sales and our customers keep buying our product."

Nickel West currently contributes just a fraction to BHP's profits, accounting for just $42 million (£34.7 million) of underlying earnings in the December half year, compared with $3.5 billion from iron ore.

Analysts and investors said given its size and focus, the division could be a better fit for another owner if BHP chooses to revisit a sale.

"By global standards, it's a very material asset in the nickel sulphide world," said Brenton Saunders of Sydney-based investment manager Pendal Group. "In the right hands, with the right cost structure it could be a great asset."

(Reporting by Melanie Burton; editing by Richard Pullin)

By Melanie Burton

Stocks mentioned in the article
ChangeLast1st jan.
ALLERGAN PLC -0.16% 165.73 Delayed Quote.23.99%
BHP GROUP LTD -0.29% 37.68 End-of-day quote.10.69%
BHP GROUP PLC -0.28% 1792.6 Delayed Quote.8.54%
CRB COMMODITY INDEX 0.10% 195.01 End-of-day quote.0.00%
FIRST QUANTUM MINERALS 10.34% 11.2 Delayed Quote.-3.99%
GOLD 0.30% 1504 Delayed Quote.16.29%
LME COPPER CASH 0.23% 5758.5 End-of-day quote.-1.38%
LME NICKEL CASH 0.23% 17270 End-of-day quote.65.42%
MHP SE 0.46% 8.72 Delayed Quote.-15.75%
SILVER 0.38% 17.875 Delayed Quote.14.34%
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Financials (USD)
Sales 2020 46 154 M
EBIT 2020 18 716 M
Net income 2020 11 291 M
Debt 2020 9 840 M
Yield 2020 4,93%
P/E ratio 2020 12,7x
P/E ratio 2021 14,6x
EV / Sales2020 5,11x
EV / Sales2021 5,30x
Capitalization 226 B
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Technical analysis trends BHP GROUP PLC
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Income Statement Evolution
Mean consensus HOLD
Number of Analysts 24
Average target price 18,79  $
Last Close Price 22,45  $
Spread / Highest target 0,13%
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Spread / Lowest Target -37,6%
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