SMM8, 16 Feb: in 2017, nearly 2.2 million tons of nickel were used worldwide, and about 2/3 of the nickel was absorbed by the stainless steel industry. Global stainless steel production rose 5.8% last year and 9.5% in the first quarter of 2018, which should also be good news for nickel, according to the International stainless Steel Forum. According to (INSG), the international nickel research group, the amount of nickel used for the first time worldwide increased by 7.8 per cent in 2017 and 9.7 per cent in the first five months of this year. There is no doubt that there are inextricable links between nickel and stainless steel. Recently, however, the historical price correlation between nickel and stainless steel has slowly changed, according to (Norilsk nickel), a Russian nickel company.
Nickel, which has also been affected by the trade war, is the only base metal that is still in the rising range on the London Metal Exchange so far this year and is currently trading at $13120 a tonne. Norilsk nickel believes that in addition to having a significant correlation with stainless steel, it is cobalt that has a strong correlation. Nickel and cobalt are the two metals expected to benefit most from the electric car revolution.
Chart of price correlation between nickel and stainless steel and cobalt in Nornickel second quarter results
In total, 40, 000 tons of nickel was consumed in electric car battery production in 2016, less than 2 per cent of the nickel used that year, according to analysts at Wood Mackenzie. For nickel, the prospects for electric cars remain bright. But Wood Mackenzie stressed that it will take years for electric vehicles to really boost demand for nickel.
Nickel inventory change
Daily clues about changes in the nickel market come mainly from LME stock reports. LME nickel stocks have fallen for 11 months in a row, with current stocks of 248328 tons.
In August 2016, the SHFE warehouse had more than 110000 tons of nickel in stock, but as of Friday, the warehouse had only 18844 tons of nickel in stock.
Chart of nickel inventory on global exchanges
Norilsk nickel's view is that the product that electric car battery makers need is nickel sulfate, which accounts for almost 100 per cent of nickel consumption. Exactly the nickel registered with LME and ShFE is the nickel that will be in short supply in the future.
Norilsk nickel forecasts a 9 per cent increase in global nickel production in 2018, but most of the production will still be used to produce nickel pig iron, compared with an expected drop to 19000 tons this year.
Mining companies are gradually shifting their focus to businesses like nickel sulfate
BHP tried unsuccessfully to sell its Australian nickel business in 2014. The company is now investing in the asset to build its nickel sulfate plant in Perth.
Privately controlled Dundas Mining plans to develop and upgrade the Avebury mine in Tasmania, which last opened in 2009.
The expected increase in demand for electric vehicle batteries has pushed up nickel prices, which in turn has spurred the recovery of nickel sulfate.
So far so good.
The main problem with nickel is that if global trade tensions continue to escalate, affecting global economic growth, the stainless steel industry is likely to suffer a lot.
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