[SMM depth Analysis] Analysis of Nickel substitution effect in vs electrolysis of High Nickel Pig Iron and the main concern of judging Nickel Price in the Future

SMM September 12: as the nickel price on the high price of high nickel pig iron has been difficult to follow up, high nickel pig iron compared with electrolytic nickel discount has reached a new high. According to the SMM price, the imported nickel is 142950 yuan / ton on September 12, and the ex-factory price of 8-12% high-nickel pig iron is 1145 yuan / nickel point. After calculation, the discount range of high-nickel pig iron to pure nickel has reached 284.5 yuan / nickel point, which is second only to the Shanghai nickel limit of 315 yuan / nickel point on September 3. Although high-nickel pig iron has a certain substitution effect on pure nickel in the application of stainless steel, the downstream of high-nickel pig iron itself is extremely single, and the bargaining power in front of stainless steel plant is weak. on the other hand, the downstream application of pure nickel is relatively more extensive and has a strong financial attribute, so it is not difficult to understand the price difference between the two. Looking back this year, the continuous expansion of the discount range of high-nickel pig iron to electrolytic nickel also reflects some changes in some trends, which will also take place in the study of nickel prices in the later stage, which will be analyzed in detail in the following SMM:

(note: a large number of data directly or indirectly quoted in this article, the original data can be found in the SMM Ni-Cr stainless steel database. For more information, please contact Wu Tingting, 13795448891. )

The following trends in the domestic nickel industry can be seen in 2019:

1. The apparent consumption of nickel pig iron in China is increasing, and it can also be judged that the actual consumption is also increasing (because the nickel pig iron industry is still in the state of capacity expansion, there is no significant surplus, inventory factors have not been taken into account in the historical data);

2. The overall trend of domestic pure nickel inventory is increasing. Under the condition that the domestic output is basically stable and the customs clearance volume has decreased in the past two months, it can be judged that the overall consumption is weakening.

Take April-May 2019 as the turning point:

Compared with electrolytic nickel, high nickel pig iron changed to a large amount of water, and the average monthly discount range gradually expanded in the next few months.

Although the price of high nickel pig iron is affected by nickel price, in essence, the financial attribute is not strong, the downstream concentration is high, and the actual transaction price is directly affected by supply and demand.

Therefore, the large discount of high nickel pig iron can directly show that its increment is no longer just to make up for the gap of domestic pure nickel, but to seek to further replace the amount of pure nickel in stainless steel plants.

Looking forward to the later stage:

The main results are as follows: 1. The long-term upside down of import leads to the decrease of import supply, and the domestic pure nickel inventory shows a small downward trend.

The inventory of Lunni is 150000 tons, which is also low in recent years, and the proportion of nickel plate is very small (only 4000 tons at present). Even after the import window is opened in the later stage, there are not many goods that can be delivered in the previous period.

If the previous period is open for delivery of nickel beans, the overall inventory of Lunni + will be at a relatively stable level. Global recessive stocks (mostly nickel beans) still have the potential to provide incremental potential if they are stimulated by high nickel prices.

2. Under low inventory, as long as pure nickel is not greatly surplus, the change of supply and demand will not become the main factor affecting the fluctuation of nickel price in the short term.

However, as the scale of the main alternatives to pure nickel in stainless steel has matured, it is also difficult for nickel prices to rise above the highs of Indonesia's mining ban in 2014 in the absence of new hype or further financial impetus.

The main focus of the 2020 fundamentals:

1. A large number of expectations for new production capacity of nickel pig iron in China and Indonesia need not be too pessimistic: nickel pig iron will further squeeze pure nickel, but the trend will progress rapidly with the commissioning of full new production capacity in China and Indonesia. By 2020, the trend will basically end, and even if nickel pig iron is overcapacity in the later stage, there will be no further extrusion of pure nickel consumption.

Low-cost nickel pig iron has a certain supporting and promoting effect on the stable production of domestic stainless steel plants.

In addition, since Indonesian high-grade nickel ores have stopped flowing into the country since 2020, after the domestic nickel pig iron plants have consumed these ores (expected to be 6-9 months), the nickel pig iron grade has declined in the later stage (less than 9%). And judging from the nickel pig iron grade that has been put into production in Indonesia, it is not high enough to completely replace pure nickel (according to July 2019, the average grade of NPI in Indonesia is 11.3%). While nickel pig iron is widely used in stainless steel plants, there is still a rigid demand for pure nickel.

2. In terms of supply and demand of pure nickel, and due to the shrinkage of stainless steel consumption of pure nickel, the concentration of downstream consumption of stainless steel decreases, and more attention needs to be paid to electroplating, battery, alloy casting, superalloy and other fields. On the supply side, it is relatively easy to observe, mainly due to the progress of overseas nickel sulphide mines, high nickel ice smelters and potential domestic production capacity (low operating rate of electrolytic nickel, nickel sulfate manufacturers with electrolytic nickel production line).

3. After stainless steel is listed on the market, its financial attribute will also be strengthened, strongly linked with nickel price, and pay more attention to the supply of stainless steel delivery products and crude steel production and downstream consumption, and focus on the impact of policy factors on the stainless steel industry.

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