Nickel sulphate returns to premiums over nickel on supply cuts, demand improvement

SHANGHAI, Sep 19 (SMM) – Prices of battery-grade nickel sulphate have again surpassed those of nickel briquette, bolstered by production curtailments and demand recovery.

As of September 18, the premium for battery-grade nickel sulphate over class 1 nickel briquette came in at 4,475 yuan/mt in Ni content, while the profit rate for producing nickel sulphate from mixed hydroxide precipitate (MHP) was negative 3%, up from an average of negative 7% for August. Nickel sulphate prices were lower than refined nickel prices in the past months.

Losses in the past two months drove nickel sulphate producers to slash output, or even shift to producing pure nickel to chase higher profits. This is estimated to lower China’s output of battery- and electroplating-grade nickel sulphate in September by 5.48% from August to 42,400 mt, or 9,335 mt in Ni content.

Recovering demand from electric vehicle batteries and robust demand from consumer batteries drove production of precursors in August up 14% month on month. Demand for nickel sulphate is expected to grow in September.

The battery-grade nickel sulphate premiums over class 1 nickel briquette are likely to further expand in September, but will struggle to exceed 10,000 yuan/mt in Ni content, the costs for turning nickel briquette or powder into nickel sulphate. SMM learned that the processing costs currently stand at 7,000-10,000 yuan/mt in Ni content.

Integrated producers of nickel sulphate and precursor in the short term will continue to procure nickel sulphate for production instead of producing nickel sulphate from nickel briquette or powder on their own.

Upside potential in nickel sulphate premiums is hampered by existing inventories, as demand recovery is unlikely to fully deplete stocks in September. SMM data showed that nickel sulphate inventories in China accumulated 1,262 mt in Ni content in June-August.

The ternary battery sector faces headwinds from the new energy vehicle subsidy cut and the competition from lithium iron phosphate batteries.