Analysts: forward Nickel Price faces revaluation

The process of high nickel matte leads to the reform of the supply side.

In March, a major piece of news in the nickel city triggered a "huge shock" in the market: Qingshan Industries announced the progress of Indonesia's high matte project and signed a high matte supply agreement with Huayou Cobalt and Zhongwei. The three parties jointly agreed that Qingshan will supply 60,000 tons of high matte to Huayou Cobalt and 40,000 tons of high matte to Zhongwei in one year starting from October 2021. After the news was announced, Shanghai Nickel fell continuously last week, narrowly defending the 120000 yuan / ton mark.

The price difference between different nickel products is expected to return.

The main impact of the news lies in the supply-side changes brought about by the production process of high matte. According to Wang Yanqing, a futures analyst at CITIC Construction Investment Co., Ltd., in the traditional nickel industry chain, high matte nickel is smelted from nickel sulphide ore, and the supply of high nickel matte project in Indonesia means that nickel iron smelted from laterite nickel ore has opened up the channel for conversion to high nickel matte.

"as the technological route of converting ferronickel to high nickel matte tends to mature, the raw materials for the production of nickel sulfate can be replenished. it breaks the balance between the supply and demand industry chains of laterite / sulphide-nickel iron / nickel plate-stainless steel and laterite / sulphide-intermediate / nickel bean-nickel sulfate-precursors." Du Fei, a futures analyst at Jinrui, said.

According to Gu Jing, a German futures analyst, the application of this technology has brought about changes in two aspects: one is the increase in total supply; the other is that from the perspective of internal structure, the two production chains of nickel iron-stainless steel and high nickel matte-nickel sulfate form a competitive relationship in the supply of raw materials.

From the perspective of the supply pattern, Wang Yanqing told Futures Daily that at present, the production capacity of Ferro nickel in Indonesia is growing rapidly, the supply tends to be oversupplied, and the price of ferronickel is heavily discounted to pure nickel. At the same time, the supply of nickel for new energy is tight, and the nickel sulfate needed for batteries produces a high premium to pure nickel. However, the news of the supply of high nickel matte in Indonesia suppresses the expectation of a shortage of nickel for new energy, making the two lines of nickel-new energy and nickel-stainless steel gradually converging, and the price difference between different nickel products is expected to return.

Cao Yang, an analyst at the East Securities Derivatives Research Institute, said the success of the industrial application of converting ferronickel into high matte means that ferronickel, which was originally oversupplied and under great pressure, has found a new scene for use in the battery field. For Ferro-nickel, the conversion will alleviate the pressure of excess supply and demand to a certain extent, but for high matte, the conversion means that the bottleneck of short-term supply growth is broken and there is great potential to increase production. "from a rhythmic point of view, as there are still half a year from trial to industrial production and delivery, the impact on actual supply and demand will be more reflected in the second half of the year, but the impact on market expectations or sentiment will be immediate." He said.

The market supply is tight and expectations may fail.

It is understood that the shortage of raw materials for the production of nickel sulfate is one of the main reasons for supporting the price of nickel in the early stage.

Du Fei said that since the fourth quarter of 2020, driven by the demand for power batteries for new energy vehicles, the demand for laterite / sulphide ore-intermediate / nickel bean-nickel sulfate-precursor-power battery industry chain has grown explosively, while the supply of refined nickel-nickel sulfate industry chain is difficult to keep up in the short term, which has become the main logic to stimulate higher nickel prices. Pure nickel (especially nickel beans), as one of the optional raw material sources of nickel sulfate, its price is also higher driven by nickel sulfate.

"previously, before the ferronickel-ice nickel-nickel sulfate process chain was not mature and opened, the price of ferronickel was more affected by the supply and demand of stainless steel. Judging from this chain, ferronickel is in excess supply. On the other hand, the industrial chain of nickel beans / intermediate products / high matte-nickel sulfate is in short supply. The prices of the two chains are relatively independent, and the opening of the nickel iron-high ice nickel-nickel sulfate process chain means that laterite-nickel iron can be fully used to supplement the demand for nickel matte-nickel sulfate. " Du Fei said that at present, the price of refined nickel is too high relative to Ferro Nickel, and there are expectations of a pullback.

Gu Jing said that from the information released by Qingshan Industry, it can be seen that its agreement with Huayou Cobalt and Zhongwei shares started supply in October this year and completed delivery within a year, which means that under the premise that there is no problem with consumption, the shortage of nickel sulfate raw materials in the short-term market has not been effectively alleviated. But in the long run, after Qingshan Industrial Indonesia High Ice Nickel Project is put into production, if the technology is widely used in the industry, the center of gravity of nickel price is bound to follow.

Wang Yanqing believes that the application of this technology will make the price of nickel closer to Ferro-nickel. However, at present, new energy accounts for a limited proportion of nickel consumption in the whole industry, which can not bring a pulling effect to the price of Ferro nickel. In terms of time, a large supply of high matte nickel will be available next year, but the market expectation of a shortage of nickel for new energy has been broken, and the future nickel price has lost an important support point.

In fact, global nickel supply has been in surplus since last year, and previous shortages were expected only in the new energy sector, which tightened expectations or failed. As a result, the market is expected to shift from overall oversupply and structural tightening to overall oversupply. " He added.

Market participants need to make a good response.

Du Fei said that the future market contradictions will be more focused on the matching of the supply rhythm of nickel ferronickel-ice nickel-nickel sulfate and the new demand for nickel sulfate. As Castle Peak Industries announced that it would start supplying high nickel matte to the outside world in October, it was earlier than the time point expected by the market. In this case, the downward inflection point of the forward nickel price may be advanced, and the nickel price is expected to bear further pressure on the downside.

"at present, after falling by the limit for two consecutive trading days last week, the price of nickel has given up all the gains since December last year, and the price of nickel iron-electrolytic nickel is basically flat. This forms a certain support to the price, the possibility that the nickel price continues to fall sharply is relatively small, and the probability of maintaining a wide range of oscillations in the short term is high. " Gu Jing said that as supply and demand expectations change, so does the market pricing mechanism. She advises investors to see more and move less, and not to chase short; for production enterprises, due to sudden price drop, value preservation has lost the opportunity; for downstream enterprises, they can enjoy the dividend of this price drop and keep stock at a bargain.

For the future nickel price, Wang Yanqing maintains the view of "more short than long sky". First, a large supply of high matte nickel will be available after October 2021, while the current supply of nickel for new energy is still in short supply; second, the current nickel price has fallen near the Ferro nickel price, and the cost support for pure nickel is still high, and the cost support for pure nickel has emerged; finally, the current expectation of global economic recovery is still strong and will continue to support the nickel price.

In his view, the support below the nickel price is gradually emerging, and investors should not be overly pessimistic in the short term. In addition, the stainless steel industry chain has not been substantially affected, with the nickel price limit but ushered in a long opportunity to do. For the relevant enterprises, the large fluctuation of nickel price is not conducive to the stable operation of enterprises, at this time, we should strengthen risk management and use futures tools to hedge risks in order to be stable and far away.

"the short-term market reassesses the supply and demand situation and reconstructs the value of long-term nickel, which is also mixed with a lot of emotional disturbance, but it is essentially a matter of price returning to the value of a particular stage." Cao Yang believes that the price of nickel will not continue to plummet in the short term, and rational investors will re-evaluate the momentum of the conversion of ferronickel into high matte after seeing the narrowing of the price gap between refined nickel and ferronickel.

In the medium term, he said, nickel pricing would return to the value of nickel, the balance between upstream mine end and downstream terminal demand. In a short period of time, due to the huge growth of demand will take time, but the bottleneck of mine supply is not obvious, supply tends to be loose and pricing moves down. But from the longer cycle latitude, he believes that there is a lot of potential growth in demand, mine-side supply bottlenecks will gradually appear, when there will be a new balance.

Cao Yang suggests that investors can think about buying opportunities after overselling in the short term. On the one hand, there is no possibility of substantial conversion of nickel and iron before the fourth quarter, and after the overfall in nickel prices, it will have a more positive impact on the supply and demand of refined nickel itself, such as restricting supply and release, promoting downstream replenishment, etc.; on the other hand, from the second quarter, whether nickel salt or refined nickel, the supply is still relatively short, the spot market can still provide short-term fundamental support. In addition, for the downstream enterprises that need to purchase raw materials, he suggests that after the nickel price has fallen, we can appropriately increase the stock volume, and in the future, we can use futures tools to better carry out risk management and avoid sharp price fluctuations.