[Hot Topic] Balance between Nickel Supply and Demand, Price Decides the Supply

SHANGHAI, Nov 15 (SMM) – Nickel price has surged since the end of September. The main reasons are numerous output restrictions for environment protection, short of inventory, and new energy cars are expected to have a strong growth in the future, which brought up the demand from the downstream. After a few days of market correction, a sharp decline happened yesterday. Long position owners brought up the price during the night, only to see it going down again after the release of China’s economy growth data.

Spot Price at Consolidation

According to SMM, the quote for refined nickel spot on Nov 14 was the same as the day before. Norilsk Nickel is at a 200 – 300 yuan / ton premium than the most-traded Wuxi 1712 contract. Jinchuan Nickel stays at a 300 – 400 yuan / ton premium. Jinchuan’s quote on its refined nickel (780x850x3~5mm) is 99,000 yuan / ton in Shanghai.

The number of transactions in the market is fairly good. Some small steel factories and alloy and electroplating plants purchased at low prices. Foundries, alloy and electroplating plants in Hebei region stopped their output and had little interest on nickel plates, due to the output restrictions for environment protection.

How Many Nickel Mines Will Be Exported to China this Year?

According to the statistic from Chinese and Indonesian customs and a survey from SMM, 3.2 million wet tons of nickel mines had been exported to China by early November. The export from November to December is expected to be 1.4 – 1.8 million wet tons. SMM estimates that the total export volume of nickel minerals from Indonesia to China will be 4.6 – 5 million wet tons in 2017. The number will be 5.4 – 6 million wet tons if 0.8 – 1 million wet tons of low-grade nickel mines exported from Indonesian customs in the name of iron mine is added into the total volume. The export in 2018 may be around 3 times as much as in 2017, taking up 40% of the demand in China. Meanwhile, the nickel mine export from Philippines declined. SMM’s research shows that the decline may be on the medium or low-grade nickel mines (Ni 1.3% - 1.4%).

Overall Balance between Nickel Supply and Demand

Li Bin, general manager of Chongqing Ruifuruize Risk Management Co., Ltd, pointed out that the reason of the balance was that PT ANTAM’s output of lateritic nickel mines, along with the total supply, was less than expected in the past 12 months.

According to SMM, the total inventory of nickel mines in all ports is 10.63 million wet tons (86,900 tons of nickel), 0.64 million more than last week. 7.94 million wet tons are in the seven major ports in China, 0.33 million more than last week.

Price Decides the Supply

Sales to the downstream are at a normal level. The future of nickel market mainly depends on the influence by from the rising price and the output from Indonesia, which may cause the supply to surpass the demand, similar to the supply increase after the price surge of aluminum.

Uptrend of Nickel Price Next Year Becomes Consensus

Li Bin also believed that the future of nickel market is unclear. Increase of the price may bring up the supply, on the other hand, a discussion between him and other nickel market experts concluded that the nickel price would have a 10% - 15% increase next year based on the current price. The balance sheet reduction by the US Federal Reserve will continue, and there will be no clear trend in the market. Actions should be taken based on monthly trends.

The article is edited by SMM and is provided for information purpose only. It does not mean SMM agrees with its views and SMM assumes no liability for accuracy of information contained or quoted in the article.