Chinese nickel sulphate producers facing raw material supply woes as Papua New Guinea bans vessels at ports

SHANGHAI, Mar 31 (SMM) – Papua New Guinea has banned vessels from calling at its ports to load cargoes after the largest Pacific Island nation declared a state of emergency last week to stop the spread of the coronavirus pandemic.

The ban has delayed deliveries of intermediate products of nickel wet-processing metallurgy, raw material for nickel sulphate production, to China, SMM learned from the world’s largest producer of such material—Ramu Nickel—which is owned by the Metallurgical Corporation of China (MMC). Those deliveries had been scheduled to arrive at China in April, but now when they will arrive remains uncertain.

Papua New Guinea is the biggest exporting country of nickel wet-processing metallurgy intermediates to China. Data from China customs showed that over 50% of China’s imports of such materials came from the Pacific Island nation last year. China imported 380,200 mt of intermediate products of nickel wet-processing metallurgy in 2019, with 197,700 mt from PNG. Those 197,700 mt of nickel wet-processing metallurgy intermediates equate to about 28,000 mt Ni, or 2,300 mt Ni per month, according to SMM calculations based on humidity of 63% and Ni grade of 39%.

China is estimated to produce 5,000-7,000 mt Ni of nickel sulphate from nickel wet-processing metallurgy intermediates and nickel matte per month (excluding February) on average this year. If the suspension of raw material supply from PNG lasts for long, China’s nickel sulphate production is expected to feel the impact in May at the earliest, given stockpiles at Chinese consumers.

Nickel sulphate is a key raw material of nickel-cobalt-manganese/nickel-cobalt-aluminium (NCM/NCA) batteries. SMM assessed prices of battery-grade nickel sulphate at 22,500-23,000 yuan/mt as of Tuesday, up 250 yuan/mt from record lows of 22,000-23,000 yuan/mt last week.

With much of the world in lockdown as the coronavirus pandemic rages on, concerns about raw material supply among Chinese nickel sulphate producers have been increasing, prompting them to hike their quotes to as high as 24,000 yuan/mt. There has yet to be transactions done at that price level.

Eased oversupply in China also encouraged nickel sulphate producers to raise their quotes, as the precursor producers began to replenish their stocks and as cheap resources have been sold out.

COVID-19 has taken a toll on global economies and dented demand, and nickel sulphate prices have declined  close to 30% from a peak of 31,800 yuan/mt in October 2019.

On March 24, PNG entered into a two-week state of emergency after the country confirmed its first case of Covid-19. The country has stopped all domestic and international flights, restricted movement from one province to another except for approved cargo, medicine and security personnel, shuttered schools, and ordered all non-essential workers to stay at home.

The MCC-owned Ramu nickel-cobalt project, located on the north coast of PNG, came on stream in 2012. Ramu NiCo Management (MCC) said its 2019 production of mixed hydroxide product (MHP) contained 32,766 mt of nickel and 2,940 mt of cobalt.