By Yange Ikyaa
The ongoing Ukraine war and ensuing sanctions imposed on Russia, which remain the most extensive in world history, have resulted in widespread instability in the oil and natural gas markets, driving well-documented disruptions to energy supplies and in other sectors.
However, the shortages in supplies of crucial basic and precious metals, including those that are known to be of critical importance in energy development and deployment, have also presented many opportunities for business, which Nigeria may be losing, while other nations may be tapping from.
These sanctions and shutdowns are projected to continue affecting Africa’s consumers as well, having manifested in increased prices of food and fuel. But the most significant energy supply-chain segment for Nigeria in this regard is the base metals segment, where it has failed to prepare for opportunities in advance and cannot seize them at the moment when they have readily become available in the global energy market.
This is because, since early 2022, the five base metals that Russia produces on a vast scale, which are nickel, aluminium, copper, iron, and zinc, have experienced sharp price increases, and continued supply disruptions are likely to see prices rise even further. Unfortunately, Nigeria, which is credited with the purest form of nickel, one of the base metals mentioned above and is used for making lithium-ion batteries, cannot benefit from its market, since the country has failed to unlock its potential.
According to Igor Hulak, Partner at Kearney, a leading global management consulting firm, “nickel, which is a critical ingredient in lithium-ion batteries and essential for the global energy transition, is in short supply. Russian companies such as Norilsk Nickel, the world’s largest nickel producer, had historically supplied global markets. However, the sanctions have made Russia, which accounts for roughly 10% of the global share of nickel, unable to meet this global demand.
“This deficit in global supply presents an opportunity for African nickel producers, such as Zimbabwe and Botswana, to step in and fill the gap. As things currently stand, overcoming existing inadequate export infrastructure will be a major challenge, requiring government buy-in and a collaborative multi-sector approach.
“Though the challenges are formidable, Africa must find a way to seize this opportunity and emerge as a key player in the new global metals market.” But seizing this opportunity is exactly what Nigeria has failed to do.
In November 2016, the Nigerian Ministry of Mines and Steel Development said that Dangoma, a village in Kaduna State, is sitting on nickel deposits that may be worth an estimated $600 billion. The discovery of this mineral resource was done by an exploration and mining Company from Australia, known as Comet.
“The discovery is unusual because the nickel is found in small balls up to 3mm in diameter of a high purity in shallow soils in what could be the surface expression of a much bigger hard-rock nickel field,” The Australian, a newspaper based in the southern continent, reported.
“The nickel balls, rumoured to grade better than 90 per cent nickel and thought to be a world first, given their widespread distribution, offer the potential for early cashflow from a simple and low-cost screening operation to fund a full assessment of the find that has exploration circles buzzing,” it further stated.
As 2016, the Nigerian Ministry of Mines and Steel Development had assured that progress was being made to exploit the huge find, which could boost Nigeria’s revenues, but nothing has been done more than the rhetoric since then, putting the country on losing trajectory on account of the idle resource in Dangoma.
This is after the Ministry had confirmed during the period that “even though the price has gone down, I think it is about $11,000 to $12,000 per tonne now, and what is in Dangoma Village- and there has been no core drilling yet, just surface examination- is approximately 40 to 50 million tonnes, and could even be more by the time we go deeper and find out what is in the place.”
That official estimate tentatively put the value of the nickel find in Kaduna at between $440 billion and $600 billion in 2016 when the price of a tonne of nickel on the London Metal Exchange was US$11,075.
However, about seven years later in 2023, the price of nickel is now $21,270 per tonne on the London Metal Exchange. This means that Nigeria, without developing its nickel potential into a real business, is losing almost double of the size of opportunities that it had lost on the same resource in 2016 due to industrial dormancy or inactivity.
Yet, based on the current price of nickel, the country is still losing an opportunity to tap into an energy resource that is worth between $1.05 trillion to 1.26 trillion but regrettably lying dormant.
Nickel is a very important alloy metal and is extensively used for making stainless steel and other corrosion-resistant alloys. Also, tubing made of copper-nickel alloy is extensively used in making desalination plants for converting sea water into fresh water, even as nickel based alloys are used for more demanding applications such as gas turbines and chemical plants.
Furthermore, nickel-containing materials play a major role in food preparation equipment, mobile phones, medical equipment, transport, buildings, as well as power generation.
In addition, nickel materials are particularly selected because, as compared with other materials, they offer better corrosion resistance, better toughness, and better strength at high and low temperatures, including a range of special magnetic and electronic properties. Its most important alloys are those of iron and chromium, of which stainless steels are the largest volume.
Hulak maintained that such base metals as nickel will remain in high demand for years to come, as the sanctions against Russia– one of the world’s biggest exporters of raw materials – is causing knock-on effects that are rippling throughout many spheres of business, from the sustainability of Africa’s mining operations to the stable functioning of the manufacturing base.
He also stated that the suspension of foreign shipping operations has triggered a worldwide shipping container shortage, and that with existing infrastructure insufficient for handling the redirection of raw materials in their full volumes to, and through Asia, industries are looking for solutions.
In addition, alternatives that make use of ageing infrastructure are unsuitable as they pose massive environmental risks, as evinced by the catastrophic 2020 diesel spill at Norilsk Nickel, Russia’s worst-ever Arctic environmental disaster.
It has been argued that China may have been able to fill the supply gaps, but ongoing COVID-related shutdowns and supply chain interruptions have made that difficult.
Hulak said that the prices of other base metals on which the world is less reliant, such as iron and zinc- and of which Russia produces 4% and 2% of the global share, respectively – are likely to stabilize.
However, precious metal prices have, by contrast, shown less volatility; and as these too are crucial to the electric economy, experts warn that price increases are still on the cards.
The most significant increases are expected in the platinum group. Russia accounts for almost 40% of the world’s supply of palladium and 11% of platinum, which is essential for hydrogen-based energy technologies, as well as alloys, circuitry, and ceramic capacitors.
But Hulak insisted that market and pricing drivers are currently indicating long-term price increases for the platinum group metals, and that this presents a golden opportunity for South Africa, the world’s largest producer of these metals, to step in and fill the supply gaps. Moreover, this, he said, is a unique opportunity for South Africa to leverage its already strong position and expand its operations in the sector to meet the escalating global demand.
He went on to add that platinum group metals are typically associated with rare earth metals such as rhodium, iridium, and palladium. With Russia unable to supply such metals, and with potential higher demand for these metals from increased military activity, it creates a market gap that African countries can fill.
His words: “Traditionally a reliable safe-haven investment, gold, of which Russia is a major producer, is likely to see moderate price increases. This could work in favor of Africa’s gold production powerhouses like Ghana and South Africa.
“The silver price is however expected to stabilize, mainly because of the lack of direct sanctions and Russia’s minor share of global production (6%).”
At this moment, with the energy transition enjoying popular public backing, the major concern now is whether the market can find enough of the critical raw materials needed to support it.
Apart from exacerbating the disruptions driven by the COVID pandemic, these supply shocks are compounding the price pressures associated with this global shift and the resources this requires.
Offshore wind plants, for example, need more than seven times the amount of copper compared to equivalent gas-fired plants; and EVs use over six times more minerals than internal combustion-powered vehicles.
Nigeria’s wealth of natural resources, including many of the basic and precious metals currently in short supply, could allow her to leverage the opportunities presented by the shift towards an electric economy.
By leveraging these resources effectively, Nigeria and Africa could unlock the potential to drive additional economic growth, develop industries along the value chain, and create jobs.