EV slowdown, nickel price rally to dent demand for refined nickel

SHANGHAI, Jul 15 (SMM) – The Chinese energy vehicle sector’s demand for refined nickel is expected to reduce a maximum of 14,000 mt in Ni content in the second half of this year, in anticipation of a slowdown in consumption of EV battery materials in the third quarter after the government significantly scaled back subsidies to the sector.

Nickel sulphate producers who use refined nickel as raw materials will make losses at current nickel prices after the recent rally, which will drive producers from refined nickel to mixed nickel–cobalt hydroxide precipitate (MHP). This will also dent demand for refined nickel.

China produced 62,600 mt in Ni content of nickel sulphate in January-June, up 27% from the same period last year and 26% from July-December of 2018, showed SMM data.

With the subsidy cuts set to kick in in late June, substantially poorer orders prompted precursor producers to slash production and procurement of raw materials such as nickel sulphate.

Battery-grade nickel sulphate began to feel the impact from June, and inventories of finished goods expanded.

Some nickel sulphate producers, pessimistic about demand in the third quarter, chose to suspend or turn to the production of refined nickel.

SMM expects limited growth in nickel sulphate output in the second half of the year. Output is estimated to stand at 63,000 mt in Ni content in July-December and to rise 27% for the full year.

Meanwhile, tepid sales of nickel sulphate, together with the recent nickel price rally, narrowed the battery-grade nickel sulphate premium over nickel briquette to 1,959 yuan/mt in Ni content as of July 11, which will push producers who dissolve nickel briquette in sulphuric acid to make nickel sulphate into losses.

SMM calculations showed that profitability at such nickel sulphate producers came in at negative 5.7% on that day, compared to a rate of 2% at producers who use MHP as raw materials.

In June, output of nickel sulphate that was produced from nickel briquette accounted for 23% of the total across 27 producers included in the SMM survey. Demand for refined nickel from the EV sector will shrink a maximum of 14,000 mt in Ni content if nickel sulphate producers immediately stop using refined nickel as feedstock.