SMM: Logic Hidden behind Rapid Surge of Nickel Price

SHANGHAI, Nov.1 (SMM)－Recently see a rapid surge of nickel price, LME Nickel broke upward $12,000 per tonne and soon touched $12,500 per tonne. SMM hereby writes an article to reorganize features of nickel market and re-claim SMM’s views on future nickel price, saying LME Nickel is expected to reach $14,000~15,000 per tonne.

Firstly, Sulfide ore keeps in shortage, global nickel plates output is bound to decline in future three years.

Over the 10 years of price decline on LME nickel market, many sulfide ore mines shut down since 2015, and moreover, current price is not high enough for those mines to return online. Parts of sulfide ore resources will be used in producing nickel sulfate in 2018-2019. BHP’s phase one of a nickel sulfate project, with annual capacity of 100,000 tonnes or 20,000 tonnes in Ni content, will start trial run in the first half of 2018 and be officially commissioned in the first half of 2019. In the coming years, global sulfide ore consumption from nickel sulfate sector will be higher than the level in years past thanks to a rapid development of global new energy vehicle market. Before LME nickel price reaches the level high enough for closed sulfide ore mines to restart production, supply of sulfide ore will remain tight, and global nickel plate output will be also curbed. SMM learns that Jinchuan Group will cut 10,000 tonnes of nickel plate supply in 2018.

Secondly, smelting nickel pig iron with laterite nickel ore is the trend, but it has limited suppression on nickel plates.

NPI production costs using laterite nickel ore are relatively lower. Based on SMM on-site survey in Indonesia, RKEF NPI production costs in Indonesia are low, and as of late September, cash costs at Indonesian RKEF NPI projects were $6,000-7,800 per tonne, and $7,500-9,500 per tonne for full costs. In the coming 3 years, Indonesian NPI output will keep growing, and the output is estimated to reach 166,000 tonnes (Ni content) in 2017, and 265,000 tonnes (Ni content) in 2018. Global NPI output is expected to hit 692,000 tonnes (Ni content) in 2018. New RKEF NPI projects in Indonesia are expected to be commissioned in 2019-2020. (For details, please see SMM China Nickel Industry Chain Report 2016-2020). SMM predicts that NPI price over refined nickel price will fall into big discounts in the coming 3 years.

Thirdly, global stainless steel output keeps increase in 2018.

SMM thinks the supply side reform will keep supporting stainless steel industry in 2018. Driven by profits, China’s stainless output will keep increasing in 2018. Meanwhile foreign output including Indonesia will also keep increase.

Fourthly, new energy market consumption is small but clear with rapid growth.

Nickel sulfate demand will grow from ternary batteries, and in the coming 3 years, ternary precursor and materials will stage a rapid growth in China. Ningbo Rongbai Li-ion Battery Material’s 200,000-tonne ternary materials project in Hubei and Guizhou, and MCC Ramu’s high-Ni ternary precursor project in Hebei started construction in mid-late October this year.

SMM predicts that China’s nickel consumption from ternary batteries for new energy vehicle will grow from 5,000 tonnes in 2016 to about 30,000 tonnes in 2020. As some countries announce to set a deadline for automakers to end sales of fossil-fuel-powered vehicles, overseas nickel consumption from ternary batteries for new energy vehicle is expected to reach 100,000 tonnes in 2020.

Go back to the surge during night on Oct.31^th, SMM thinks the reason is during LME annual party, the potential of new energy cars is huge and the consumption increase anticipation during next year and future three years have been clear. Capital begins to focus on nickel market.  While with regard to recent domestic consumption, downstream demand is not very desirable. The price may rise upward and stop at $13,000 per tonne. SHFE Nickel Main 1801 may stop at 105,000~110,000 yuan per tonne.

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