SMM7 March 14: at the 2020 (Fifth) China International Nickel-Cobalt-Lithium Summit Forum and China International Nickel-Cobalt Industry chain Summit held by SMM, Macquarie Commodities Strategy Senior Commodities Consultant Jim Lennon analyzed the distribution of global nickel resources and expansion projects.
Nickel prices soared due to Indonesia's announcement of a ban on ore, but due to a surplus due to a weak spot market for nickel, the epidemic led to a decline in short-term major demand and contributed to a sell-off in the first quarter of 2020, however, nickel prices have stabilized due to sharp production cuts and news of China's economic recovery.
Indonesia Nickel's new project has been announcing that the outbreak has not affected existing production, but is expected to slow down new projects, especially HPAL, but so far is improving NPI.
The battery is still a small use of nickel.
The demand for nickel accounts for 70% of the demand for stainless steel, while batteries currently account for only 7%, but it may grow to 20% in the next 10 years, and batteries may grow by more than 50% a year, so it is already very important. not all nickel can be used to make nickel sulfate for batteries, especially most forms of nickel used in the manufacture of stainless steel (ferronickel, nickel pig iron and recycled stainless steel scrap). Competition in the form of "suitable battery" nickel has intensified.
The main problems in the medium-term outlook
What is the growth rate of stainless steel usage and stainless steel scrap supply from China?
How fast can the nickel in the battery grow? -huge predictive uncertainty, especially with regard to the use of NCM 811s (high nickel content) batteries
How fast will Indonesia's nickel pig iron output replace China?
In the medium term, is Indonesia's ore supply limited?
What is the next source of nickel supply for the battery industry?
Indonesia surpasses 200ktpa's HPAL project, but is skeptical about time, environmental issues and the cost of capital
Can NPI and stainless steel scrap replace the amount of Class1 in the stainless steel industry?
Will NPI be converted to nickel sulfate?
The use of nickel in batteries will grow strongly in 2020.
Nickel will benefit from the strong growth of electric vehicles and gradually increase the amount of nickel used per battery (partly at the expense of cobalt). By 2025-30, the average nickel content per vehicle can increase from 20kg to 40Mel 50kg, but this depends on the adoption of NCM 811battery technology (currently mainly NCM 532amp 622).
2025: 460kt nickel (down from previous 505kt) and 2030: 932kt nickel (down from 1030kt). Demand for 2020 is being hit by coronavirus-related weakness, but this may be temporary, but it does delay demand until 2025. Other battery technologies, especially LFP and hydrogen fuel cells, also play a role.
HPAL projects for the battery market-mostly in Indonesia, and some projects after 2025 may be launched earlier
A large number of proposed HPAL projects, Indonesia's first project has been "late" 1-2 years, at least half of the known projects may not be completed after 2025, but if the first project is successful, there may be many other Indonesian projects.
Will Class 1 nickel transfer from stainless steel market to battery market by 2024?
NPI production is growing much faster than total stainless steel production, with the potential to release category 1 nickel from 200ktpa from stainless steel to other uses, including batteries, from 2019 to 2024, with nickel pellet inventory on the London Metal Exchange (LME) 200kt + as another source of supply.
Supply of nickel in batteries-growth from HPAL / leaching-growth assumptions up to 2030
We believe that the growth of more than five new projects (200ktpa +) in Indonesia-the timing is still uncertain, two Australian green spaces (CleanTeq and Sconi) plan to add 35ktpa, but indefinitely delayed, Ramu may almost double from 35ktpa to 65ktpa (unconfirmed, but we assume after 2025), 30ktpa Ravensthorpe will reopen this year, Terrafame will rise from 30ktpa to 35ktpa and switch to nickel sulfate in 2021.
Challenges facing the HPAL Project in Indonesia
Closest to the Indonesian project of China's pull wood project in Papua New Guinea, the lowest cost HPAL (report). Cost of capital in Indonesia-lower than previous projects: currently estimated at about US $30000 / tonne, compared with the best recent projects, Ramu,Taganito and MetaNikel, which cost US $60,000 per tonne, and the worst projects, which cost more than US $100000 per tonne.
Operating costs depend largely on the price of cobalt (the ratio of nickel to cobalt in the ore is 10:1); the average company price fell from $81000 / t in 2018 to $36000 / t in 2019. Environmental challenges in tailings: Ramu uses deep-sea tailings for disposal. The Indonesian government is about to issue licenses for three projects-some carmakers will not accept the product in their batteries.
Previous projects took a long time to build, with major cost of capital overruns and slow growth. The Indonesian project has been seriously delayed. The incentive price of NPI project is in the range of $10mur12000 / t, while the incentive price of HPAL is in the range of $13mur15000 / t. The backup plan may be to convert NPI to nickel sulfate with an additional cash cost of $3mur5k / t.
To sum up:
The sharp growth in NPI in 2018 and 2019 and the collapse in demand have created a glut in the global market. There are still short-term downside risks in our demand forecasts, but there are also downside supply risks. The use of battery nickel will be the main area of growth for nickel by 2030-there is great uncertainty about the real growth rate by 2020, but in our view, medium-term risks remain. The supply response to meet the incremental demand growth comes from Indonesia, currently from NPI, but in the future from high-pressure acid leaching projects. HPAL's record creates uncertainty. We increasingly believe that the conversion of NPI / FeNi to fog / refining may become a source of growth of nickel in batteries.
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