(Ecofin Agency) - By 2035,  90% of the world's nickel supply will be unprotected by existing US free trade agreements, according to S&P Global. This scenario is prompting Washington to diversify its sources for nickel, an essential mineral for energy transition.

The U.S. Development Finance Corporation (DFC) is ready to lend Tanzania cash to develop the Kabanga nickel project, which includes constructing a battery-grade nickel production facility. The announcement aligns with the U.S. strategy to secure a stable supply of critical minerals.

“With DFC’s interest in supporting Kabanga, the U.S. government clearly recognizes the critical role that sustainable mineral development in Africa plays in the global energy transition. Today’s announcement reinforces this vision and again highlights the strong relationship between the United States and Tanzania,” commented Chris Showalter, CEO of Lifezone Metals, the company piloting the project, in a September 23 statement.

According to the International Energy Agency (IEA), applications related to energy transition, such as electric vehicles and energy storage batteries, accounted for 15% of global nickel demand in 2023. This figure is projected to rise to 36% by 2030 and potentially reach 50%, depending on the pace of global energy transition efforts.

S&P Global indicates that the Inflation Reduction Act of 2022 (which will accelerate the country's energy transition) will lead to a 14% increase in nickel demand compared to scenarios without this legislation. The same source points out that by 2035, 90% of the world's nickel supply will not be covered by the various free-trade agreements signed by Washington.

Furthermore, with Indonesia supplying half of the world's nickel production by 2023 and accounting for 65%  of the world’s refined nickel output alongside China, the U.S. is keen on reducing its reliance on these countries.

U.S. Vice President Kamala Harris noted in 2023 that nickel from Kabanga could enter the U.S. market as early as 2026. A definitive feasibility study is expected by year-end, which will detail initial investment requirements, production capacity, and project lifespan. According to an assessment published in 2021, the project can yield approximately 33,107 tonnes of refined nickel annually, along with significant amounts of copper and cobalt—metals also vital for energy transition.

The Tanzanian government anticipates revenues of $7.5 billion over the project's projected 33-year lifespan.

Emiliano Tossou