Estimated reading time: 6 minutes
Author: Wang Zhiqiang
Since the beginning of this year, the overall domestic nickel in Shanghai has been in a strong and volatile trend, and it has approached the highest level in history. On the one hand, the increase in nickel prices in Shanghai is due to the fact that downstream stainless steel maintains high production, while import reflux cannot fully meet demand. Domestic demand for nickel pig iron has rebounded, while nickel ore prices have remained strong, and nickel pig iron quotations have continued to rise, raising the demand for nickel. Support the bottom line; on the other hand, the demand for nickel sulfate is also very strong, the overall supply is tight, the price keeps up with the rise, and the demand for the dissolution of nickel beans remains strong, the inventory of LME nickel beans continues to decline, and the premium for domestic nickel beans continues to maintain The strong demand and strong demand have formed strong support for nickel prices.
Domestic supply-side output declines
Import increase is less than expected
On the mining side, from the perspective of China’s nickel mine port inventory, the epidemic situation in the Philippines has deteriorated again since the summer. The country’s daily average number of new cases far exceeds the level of last year. Among them, Palawan province, a nickel mining area, has even declared a state of disaster. Subsequent to the continuation, the local shipping schedule has been significantly extended, resulting in a less-than-expected increase in laterite nickel mines in China. As of July 23, the national nickel ore port inventory was 5.663 million tons, a year-on-year decrease of 29.91%. The nickel ore inventory at domestic ports is still at a low level. It is expected that the import of nickel ore from the Philippines will continue to increase in the second half of the year, but the recovery of nickel-iron production will drive the consumption of nickel ore, and the port nickel ore inventory may be difficult to accumulate significantly.
In terms of ferronickel, the domestic production of ferronickel has generally declined year-on-year. On the one hand, backward production capacity has been eliminated, and high energy consumption and high cost production capacity has been eliminated. On the other hand, my country’s ore inventory has remained low after Indonesia’s ban on ore exports, which has gradually led to a further decline in domestic production. From January to June, the output of nickel pig iron was converted to 223,000 tons of metal, down 12.4% year-on-year. In terms of ferronickel imports, from January to June, China’s total import of ferronickel was 1,862,500 tons, an increase of 304,100 tons or 19.52% year-on-year. Among them, the import volume of ferronickel from Indonesia was 1.5744 million tons, an increase of 301,600 tons year-on-year, an increase of 23.70%. However, it is worth noting that China’s imports of ferronickel in June were only 273 million tons, a decrease of 9.30% from the previous month. The author believes that there are two reasons for the decline in the import volume of ferronickel in June: First, the Indonesian Mining Enterprise Association promoted the development of the downstream nickel industry in Indonesia, and the demand for ferronickel in Indonesia increased; The port responds to environmental protection needs and other short-term shutdowns. With the continuous commissioning of new ferronickel projects in Indonesia in the second half of the year, the import volume is expected to rebound. But in the long run, as the Indonesian government continues to promote the development of the nickel downstream industry, it is still unknown whether the future imports of ferronickel can make up for the decline in domestic production.
Overseas demand continues to recover
Domestic demand remains strong
The downstream stainless steel supply and demand are the two strongest. The crude steel output of stainless steel in the first half of the year exceeded 16.8 million tons, a significant increase of nearly 28% year-on-year. While profits are picking up and output is rising, domestic and foreign demand for stainless steel continues to improve, and inventories in the two places are also maintained. In the second half of the year, the completion cycle of domestic real estate may continue to drive stainless steel consumption. In addition, in terms of stainless steel exports, although the domestic stainless steel export tax rebate policy has been cancelled since May 1, the stainless steel export volume has not been greatly affected. Only in May the export volume has fallen, which also proves that overseas demand is relatively strong.
New energy vehicles drove a surge in demand for nickel sulfate. From January to June this year, the production and sales of new energy vehicles both exceeded 1.2 million, reaching 1.215 million and 1.206 million respectively, a year-on-year increase of two times. On the one hand, boosted by the “dual-carbon policy”, on the other hand, consumer acceptance has increased due to the technological advancement and price advantage of new energy vehicles. The rapid development of the new energy market has driven the demand for nickel sulfate, one of the main raw materials for new energy batteries, to continue to strengthen. Although Indonesia’s Qingshan “Nickel Iron-High Matte Nickel-Nickel Sulfate” project started supply in October this year, the output is expected to be limited and cannot fully cover sulfuric acid. The demand for nickel raw materials and the mismatch of supply and demand still support the demand for nickel beans. From a long-term perspective, according to the State Council’s “New Energy Vehicle Industry Development Plan (2021-2025)”, by 2025, new energy vehicles will account for 20%. Based on this, it is estimated that the annual growth rate of new energy vehicles will be about 36%. At present, countries around the world have successively introduced a timetable for “burning ban”, and auto companies have also increased their investment in new energy vehicles. With the gradual improvement of charging infrastructure, new energy vehicles will gradually dominate the automotive market, and the market potential is huge.
Inventory continued to go away at home and abroad
The gradual recovery of the global economy has boosted the demand for nickel, and the overall decline in domestic and foreign nickel inventories. Globally driven by the strong demand for stainless steel, the decline in domestic nickel plate inventories, and the rapid development of new energy vehicles have driven the increase in demand for nickel sulfate. However, with the limited supply of wet-process intermediate products, the consumption of nickel beans continued to rise and the overall inventory declined.
On the whole, the expected rebound in liquidity tightening in the second half of the year may interfere with the upward trend of nickel prices. However, in the long run, as the global economy continues to recover, domestic and foreign demand is generally improving, stainless steel production rebounds, and the new energy market maintains High growth and continued decline in domestic and foreign nickel inventories will continue to support nickel prices.