[SMM depth Analysis] Annual Review and Prospect of Global Nickel Sulfate Market

SMM, 24 Dec:

In 2019, the nickel sulfate market experienced a roller coaster market. In the first half of the year, downstream enterprises rushed to "rush" before subsidizing the retreating slope, and the nickel sulfate market was once in short supply. In June, with the official retreat of new energy vehicle subsidies, superimposed "national five" low-price clearance of inventory, nickel sulfate demand plummeted, battery-grade nickel sulfate premium to first-grade nickel fell sharply.

SMM believes that from 2020 to 2022, the premium of nickel sulfate over metal nickel will continue to be higher than the cost of nickel bean dissolution to produce nickel sulfate. According to 2018 data, the cost of nickel bean and powder dissolution to produce nickel sulfate liquid is about 7000-8000 yuan / metal ton, and the premium is expected to run between 10000-15000 yuan / metal ton in the next three years, which is further lower than the premium in 2019. The reason is that the balance of supply and demand of SMM nickel sulfate shows that nickel sulfate as a whole will be in equilibrium in the next three years, and because there is no bottleneck in the production capacity of nickel sulfate, the industry is gradually moving in the direction of loose balance.

Battery grade nickel sulfate premium to primary nickel (bean)

I. balance of supply and demand of nickel sulfate in the world and China, 2019-2022

1. Supply of nickel sulfate in 2019-2022

Global nickel sulfate production rose to 1.39 million physical tons in 2019, an increase of 350000 physical tons over 2018. Of this total, China's nickel sulfate production capacity increased to 1.05 million physical tons, an increase of 330000 physical tons over 2018. It is clear that almost all of the new production capacity of nickel sulfate comes from China. The global nickel sulfate production capacity will continue to expand in 2020-2022, mainly from Jinchuan Group, Jilin Jean, BHP, Finland Terrafame and Indonesia Wet method Project. The total production capacity will reach 2.5 million tons by 2022, with a compound growth rate of 12 per cent in 2020-2022.

Global nickel sulfate production was 940000 physical tons in 2019, a growth rate of 25 per cent, down 5 percentage points from 2018. Among them, China's nickel sulfate production grew by 33 percent, down 17 percent from 2018. The main reason is that the market in 2019 not only faces a reduction in overall demand during the transitional period of new energy subsidies in June, but also affects the demand of the new energy vehicle industry to a certain extent. Nickel sulfate enterprises that transmit to the upper reaches do not receive orders well, and nickel sulfate prices fall in the face of a sharp rise in raw material prices. The profit level shrank sharply, and China's nickel sulfate enterprises stopped production by a large margin in the second half of the year. With the complete elimination of subsidies in 2020 and the abolition of the "whitelist" of power batteries, China's power battery industry may usher in a major reshuffle, dragging down the growth rate of nickel sulfate, the upstream raw material. SMM estimates that global nickel sulfate production in 2020 will drop to 9%. From 2021, as new energy technologies conquer and the entire industry tends to develop healthily, the growth rate of demand is expected to return again. Nickel sulfate production will also continue to expand with the growth of demand, and the production growth rate will remain above 20% in 2021-2022.

Trend Chart of Global Nickel Sulfate production from 2016 to 2022

Trend Chart of capacity production of Nickel Sulfate in China from 2016 to 2022

2. Demand for nickel sulfate in 2019-2022

In 2019, global precursor production was 350000 tons, an increase of 35%. Departments, 523,622 still accounted for the mainstream, accounting for about 67% of the total, 811 and NCA accounted for about 30% of the total. Of this total, China's precursor production increased by 38 per cent to 275000 tons, accounting for 72 per cent of 523 and 622, while 811 and NCA accounted for 23 per cent. After the transitional period of new energy subsidies in June 2019, the overall demand of the market shrank, and the process of high nickel in the domestic consumer market suffered a short-term stagnation. SMM predicts that in order to solve mileage anxiety, high nickel is the only way for the development of ternary materials. In the future, with the research and development of star high-end models and breakthroughs in the research and development of high-nickel batteries in battery factories, the proportion of medium and low nickel ternary materials will account for or further decline, and the proportion of ternary precursors will continue to decline. SMM predicts that China's ternary precursor production will grow to 515000 tons by 2022, and that China's ternary precursor production will grow at a compound annual rate of 17 per cent between 2020 and 2022.

Trend chart of ternary precursor production in the world and China from 2016 to 2022

2019 VS 2020 VS 2022 proportion of global precursors

2019 VS 2020 VS 2022 proportion of Chinese precursors

3. Balance of supply and demand of nickel sulfate in 2019-2022

In 2019, there was a small surplus in the global and Chinese nickel sulfate market, mainly due to weakening market demand in the second half of the year and almost no ready demand at the end of the year. Coupled with the contraction in profits of nickel sulfate plants, prices were set up for sale, and there was a certain amount of inventory in each factory. But overall inventory levels are not high. From 2020 to 2022, China's nickel sulfate market maintained an overall balance, with an average annual surplus of 10, 000 to 20, 000 tons.

SMM believes that there may be a state of equilibrium between production and reduction in the nickel sulfate market, but it is difficult to see a long period of shortage or surplus. On the one hand, the production process of nickel sulfate has a simple path, that is, adding nickel powder and bean sulfuric acid to the reactor to form nickel sulfate liquid. This production path has low investment cost (hundreds of thousands of grades) and short construction period (within half a year). It is one of the ways for domestic ternary precursor factories to obtain nickel sulfate raw materials. Therefore, under the condition of sufficient raw materials of nickel beans and powder, the output of nickel sulfate can be increased rapidly. On the other hand, the physical properties of nickel sulfate are crystalline hexahydrate compounds, which are stored at room temperature for about 3-5 years, which is shorter than that of nickel metal, so it does not support nickel sulfate such as nickel metal to accumulate for a long time.

Global balance of supply and demand of Nickel Sulfate from 2016 to 2022

Supply and demand balance of Nickel Sulfate in China from 2016 to 2022

II. Review of the cost and profit level of Nickel Sulfate in 2019

According to the SMM nickel sulfate cost model, without considering the raw material cost, the processing cost of waste is the highest, the intermediate product is the second, the metal nickel is the lowest, and there is no bottleneck in the use of the three raw materials. In terms of comprehensive cost, due to the high price of raw materials, the production cost of nickel is the highest, the intermediate goods is the second, and the waste is the lowest.

Comparison of Cash cost of Nickel Sulfate with different Raw Materials

Note: the cost of raw materials is calculated at the average price in November 2019

In the first half of 2019, the downstream power battery enterprises rushed to install before the subsidy retreated, the domestic nickel sulfate market was in short supply, and all kinds of raw materials processed nickel sulfate were profitable. With the official retreat of subsidies, the pressure of nickel sulfate enterprises increased sharply, and the profit margin decreased significantly. After September, with the reduction of production of nickel sulfate enterprises, the profit margin increased, but the production of nickel sulfate from dissolved metal nickel was always in losses. the amount of nickel bean autolysis used in precursor factories decreased significantly.

Profit margins of Nickel Sulfate for different Raw Materials from January 2019 to December 2019

Remarks: 1. The cash cost calculated in the model is 2. Conversion of nickel sulfate price to incoming cash price

III. Analysis of the proportion of Nickel Sulfate Raw Materials from 2019 to 2022

The proportion of nickel sulfate produced by intermediates rebounded to 53% in 2019, up from 47% in 2018. The main reasons are as follows: 1. The production of nickel sulfate by metal nickel is in loss for most of 2019, and it is more economical for precursor factories to purchase nickel sulfate products directly than to use nickel autolysis. 2. Intermediate goods accumulated a certain amount of inventory in the port in 2018, and most of the inventory has been digested into the market in 2019.

In 2020-2022, the share of intermediate use is expected to decline to 44% by 2022, while the use of nickel is expected to rise slightly to 28%. SMM predicts that the incremental release of new global intermediate production capacity from 2020 to 2022 will be limited and will not be sufficient to meet the incremental demand for nickel sulfate, which will increase the use of nickel sulfate.

Comparison of the proportion of different Raw Materials of E Nickel Sulfate from 2017 to 2022

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