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Low inventory "turn stone into gold" new supply "cold" Nickel in the year of the Tiger can "Tiger whistle Fengsheng"? [agency Review]

iconFeb 1, 2022 10:00
Low inventory "turn stone into gold" new supply "cold" Nickel in the year of the Tiger can "Tiger whistle Fengsheng"? Will this market continue in the new year? When will there be a qualitative change in the main factors leading to the overall upward rise in nickel prices? What will be the mainstream trend of the market in the future? What are the issues that investors in the nickel market should focus on? In this regard, the reporter exchanged views with several professional analysts in the industry, and let's listen to their views and investment suggestions.

On the eve of the Spring Festival, nickel, an "old" and "young" metal variety, stirs up the metal spot market, adding thoughtful topics and topics for many futures investors during the Spring Festival holiday.

As a common metal element, the Chinese, ancient Egypt and Babylonians used nickel-containing meteorite to make objects, but the purer nickel was not made until 1775 and was identified as an element. Pure metal nickel shows silver luster, has good plasticity, corrosion resistance and magnetism, and is an indispensable metal in the development of modern national defense industry, aviation industry and people's daily life. It is mainly used in stainless steel production, electroplating, chemical power supply and so on, and the demand for nickel in the market is increasing.

Since the relationship between nickel and us is not unfamiliar, especially the trading variety popular with many futures investors, why does it still attract everyone's attention? The reason is that the market has a major market of low inventory "turning stone into gold" and high ice nickel "cold".

The cumulative increase in 27 trading days reached 42250 yuan / ton.

According to the reporter's understanding, the contract price of Shanghai Nickel 2202 rose from the lowest price of 139930 yuan / ton on December 16, 2021 to the highest price of 182180 yuan / ton on January 24, 2022, with a cumulative maximum increase of 42250 yuan / ton in 27 trading days. However, during this period, although the price of nickel rose by more than 13000 yuan / ton on January 20, 2022, it fell by 7950 yuan / ton on January 24. Then, on January 25, under the premise that there was no qualitative change in the supply and demand pattern, the spot price of nickel in the domestic market suddenly fell sharply, with intra-day volatility of about 8000 yuan / ton, and the futures prices of many contracts in Shanghai fell to the limit on the same day. The cumulative decline of some contracts in two trading days was about 18000 yuan / ton. At the same time, the price of nickel in the international market and related commodities at home and abroad, such as stainless steel, have also risen continuously and suddenly fluctuated widely. Investors are very concerned about the wide range of short-term market price fluctuations.

Will this market continue in the new year? When will there be a qualitative change in the main factors leading to the overall upward rise in nickel prices? What will be the mainstream trend of the market in the future? What are the issues that investors in the nickel market should focus on? In this regard, the reporter exchanged views with several professional analysts in the industry, and let's listen to their views and investment suggestions.

Low inventory turns stone into gold, while high demand pushes prices up.

First of all, let's find out the main factors that trigger the sustained rise in nickel prices and when this factor will change qualitatively. The high concentration of supply in the nickel market, the high demand under the new economic development model, the historical low level of inventory, and the expansion of supply channels in the future are the key points that investors need to pay attention to.

Fan Runze, a senior analyst at the China Investment Anxin Futures Research Institute, believes that the main reason for the rise in nickel price is the rapid development of global new energy vehicles in 2021, the demand for nickel for power batteries far exceeds expectations, the superimposed global stainless steel production also maintains a high growth trend, and the global dominant inventory of nickel continues to decline. for example, LME nickel inventory has continued to decline since the second quarter of 2021, and has recently fallen below the 100000 ton mark. On the other hand, the domestic nickel social inventory is less than 20,000 tons, which is at an all-time low. At present, the current situation of supply and demand in nickel city is still relatively tight, and the degree of supply concentration is high.

"there is a turning point in the continued elimination of global nickel explicit inventories, which needs to wait for the release of production from new energy-related nickel raw materials projects in Indonesia." Fan Runze said that the nickel raw material projects invested by Chinese enterprises in Indonesia have a production capacity of more than 500000 tons, and some production capacity is expected to be released in 2022, mainly in the second half of the year, as Indonesia's wet-process and high-matte projects are put into production or reached production. The removal of pure nickel to the depot slows down or turns into accumulation again, and the downside risk of nickel price may increase. However, in the long run, in the context of "double carbon", the global new energy vehicles have stepped into the "fast lane" of development, and nickel still has long-term investment value.

Jinrui Futures Nickel and stainless Steel researcher Zhou Weigang told reporters that the root cause of the rise in nickel prices is low inventory and continued warehouse expectations in the first half of 2022. At present, the inventory of the global nickel market is very low, such as London and Shanghai, the total inventory is only about 120000 tons, and the nickel plate inventory is as low as 30, 000 tons. At the same time, the global demand for stainless steel and new energy remained strong in the first half of 2022, especially the demand for autolysis of more than 10,000 tons of nickel beans before the supply of MHP and high matte nickel. In terms of stainless steel, Ferro nickel in Indonesia is in the stage of climbing production, but the production of ferronickel in China and Indonesia is still in short supply of stainless steel. Therefore, the removal of nickel from the warehouse is expected to continue until the balance of demand for stainless steel is achieved in Indonesia Nickel Iron and Steel.

According to Guotai Junan Futures Senior researcher Shao Wanjie, the main factor for nickel prices to continue to rise is the impact of extremely low inventories and emergencies. In January 2022, the dominant inventory of the global nickel market is in a very low position and continues to decline. The total global refined nickel inventory is about 110900 tons, of which LME inventory is 94800 tons and domestic inventory is 16100 tons. From the perspective of the domestic market, due to the few days of refined nickel import window opening and low profits, and the limited resources for overseas entry into domestic customs, low inventory further leads to the phenomenon of low domestic warehouse receipt inventory. At the same time, recently, there have been frequent "impact events" in the nickel market, including the bombing of the Dagong Mountain Power Plant in Myanmar, the sharp rise in carbon prices in Europe and the increase in carbon tax in Indonesia, and the imposition of nickel and iron export tariffs in Indonesia. The above events on the nickel market supply and cost rise is limited, but the impact of the incident further triggered the market concern about the supply side of nickel, superimposed the contradiction of low inventory, LME nickel prices hit an all-time high, the main contract price of Shanghai nickel also hit a new high.

Wang Weimang, Zhonghui Futures Investment Manager, said that in 2021, the macro environment was loose, the industry gap was obvious, and nickel prices rose sharply. The global monetary release and fiscal stimulus have led to strong global manufacturing demand, high growth in stainless steel production and a blowout in the production and sales of new energy vehicles. More importantly, Indonesia's export ban policy and epidemic situation interfere with mine strikes, resulting in an obvious shortage of supply. For the whole of 2021, the Shanghai Nickel Index rose by 22.64%. At the same time, global nickel inventories fell, and inventories at home and abroad fell sharply to an all-time low. Recently, Indonesia said it would impose a tax on Nickel Iron and Nickel Pig Iron exports in 2022, as well as the explosion of a nickel processing plant in Dagong Mountain in Myanmar.

The new supply pattern is more up-to-date, and the high matte is "cold".

Secondly, let's take a look at the main supply channel of the nickel market, the future supply situation, and the time points and factors that may lead to its change.

Fan Runze believes that the global primary nickel pattern has gradually formed a new market pattern, with production growth mainly concentrated in secondary nickel and nickel salts, while primary nickel production has declined slightly. In the future, with the growth of nickel demand for new energy vehicles, more new projects will focus on battery nickel, that is, the production of nickel sulfate. The proportion of primary nickel in primary nickel will gradually decline, while the proportion of secondary nickel and nickel salts will continue to increase.

"at present, the focus of the global nickel market supply has shifted from China to Indonesia. Indonesia has become the world's largest nickel producer. Indonesia is rich in laterite nickel resources. In the past few years, Chinese enterprises, represented by Castle Peak, have entered the Indonesian nickel industry on a large scale. In order to ensure the raw material demand of the domestic stainless steel industry, a large number of nickel-containing pig iron production lines have been built there. Indonesia's production of nickel pig iron reached 840000 tons in 2021, an increase of 270000 tons over the same period last year. " Fan Runze told reporters that judging from the production progress of Indonesia's new nickel-iron production line, Indonesia's production of nickel-containing pig iron is expected to be about 1.15 million tons in 2022, an increase of 37 percent over the same period last year. Fan Runze said that in recent years, affected by the rapid growth in the amount of nickel used in power batteries for new energy vehicles, in order to alleviate the pressure of insufficient supply of raw materials, Chinese enterprises represented by Huayou and Liqin have entered Indonesia's construction of high nickel matte and nickel wet intermediate smelting projects. most of these projects are still under construction and will take about one year to be put into commercial operation. The production schedule and smooth output of the new project in Indonesia are important factors that determine the trend of nickel price in the future.

Zhou Weigang told reporters that from the global supply side, the supply of traditional areas such as nickel plate, nickel beans and nickel and sulfur is relatively stable, and the unexpected production cuts of Russian nickel and Vale have been restored in 2021. In terms of new growth, Indonesian Ferro Nickel is the main increment, conservatively estimated to increase by 300000 metal tons in 2022; in terms of new energy, Indonesia MHP and High Ice Nickel will be put into production in 2022, in which MHP production is expected to be relatively stable, the key point is whether Castle Peak High Ice Nickel can be fully supplied to the market as expected. If it runs as expected, Indonesia's ferronickel production of more than 100000 metal tons per month can reverse the trend of de-stocking in the market, and the logic of the nickel market will change from a shortage of supply to a surplus.

According to the reporter's understanding, the change in new supply has a great impact on the rise and fall of nickel prices, and the sharp decline on January 24 and 25 in 2022 has a lot to do with the "appearance" of matte. According to the information released by relevant institutions in the market, the first ship of high ice nickel in Castle Peak, Indonesia has set sail. The first batch of high matte products from the Morowali Park in Aoyama, Indonesia have been collected at the port and officially shipped back to China. At present, there are three high matte production lines in the Morowali park, with a monthly nickel production capacity of about 3000 tons. In addition to the existing production lines, the Castle Peak Park in Indonesia also plans to build a number of new production lines. This is the first shipment of products except samples since the release of Castle Peak High Ice Nickel in March 2021. Prior to this, Aoyama and Huayou and Zhongwei signed an agreement to supply 75000 tons of high nickel matte per year from October 2021 to October 2022. The total volume of the ship is about 500 physical tons. Industry insiders believe that the production of high nickel matte will change the composition and structure of nickel raw materials in the new energy field, and its economic advantages will enable it to surpass nickel beans to become an important raw material for nickel sulfate, and Indonesia's high nickel matte production line will also speed up the construction process. However, large-scale production of high matte will take time, and mass production may be reflected in the second quarter of 2022. At present, nickel beans still account for more than 45% of the raw materials of nickel sulfate, and the demand for nickel beans is still high in the short term. If the great success of Qingshan Industrial High Ice Nickel Project is copied by batch commercialization in the future, High Ice Nickel will become one of the important nickel circulation products, and High Ice Nickel will compete with Nickel hydroxide. Stainless steel will compete with nickel sulfate for raw materials, and the industrial pattern will be diversified.

Shao Wanli expects that the trend of high nickel prices will continue in the short term, which is expected to reverse in March 2022, and the decline rate of explicit inventory in the global nickel market will slow down as high nickel and nickel iron are put into production in 2022. The pattern of oversupply of ferronickel in China and Indonesia is relatively clear. After the nickel mine in Indonesia, the production of nickel-iron crude steel is ready to be expanded. The release rate of nickel-iron in Indonesia is expected to be higher than that of stainless steel, with an increase of 54 percent in nickel-iron and 27 percent in stainless steel over the same period last year. Indonesia's nickel-iron surplus has increased from 660000 tons to 1.08 million tons. In 2022, the nickel resources at the new energy end or the supply and demand will increase, and the increment on the supply side is obviously larger than that on the demand side. Due to the great difference in the cost of smelting nickel sulfate with different nickel raw materials, Indonesian wet and fire products are expected to occupy overseas nickel beans and overseas MHP markets. The demand for nickel from new energy may be 201000 tons, an increase of 26 percent over the same period last year and an increase of 42000 metal tons over 2021. The output of new energy nickel projects in Indonesia is expected to reach 303000 tons in 2022, and the production of new energy projects in Indonesia is expected to reach 456800 tons in 2022-2023, including 294000 tons for fire projects and 162800 tons for wet projects.

The demand growth rate is high, and stainless steel new energy is the key point.

Thirdly, what are the demand growth points of the global and Chinese nickel market that the majority of investors are most concerned about? What will be the trend in the later period?

"the expectation of consumption growth in the nickel market in the future is mainly driven by the rapid promotion of the battery industry and the stable support of the stainless steel industry. In 2021, global crude stainless steel production increased by 12 per cent year on year to 56.5 million tons. Global stainless steel production is expected to grow again in 2022, with an annual total of 58.2 million tons in 2022, an increase of 2.5 per cent over the same period last year. The stainless steel project in Indonesia has realized the advantage of integrated red delivery of raw materials, and the lowest point of global stainless steel production cost has been transferred from China to Indonesia. The expansion of Indonesian production should continue. Indonesia's stainless steel production is expected to exceed 6 million tons in 2022, an increase of 18% over the same period last year, and continue to maintain a high growth rate. " Fan Runze said that the growth in demand for electric vehicles is the government's stimulus measures to offset the impact of the epidemic, coupled with continued carbon reduction measures, the demand for nickel in the battery industry will increase rapidly, and the proportion of nickel consumption in the battery industry is expected to reach 28% by 2030. the stainless steel industry fell to 57%. From January to November 2021, global sales of new energy passenger vehicles reached 5.576 million, accounting for 7 per cent of the global automobile market, and sales for the whole year are expected to exceed 6.2 million. Based on the data of penetration and sales targets of car companies in major regions of the world, global sales of new energy vehicles are expected to exceed 10 million in 2022, with a penetration rate of more than 10 per cent, a year-on-year growth rate of about 50 per cent.

Zhou Weigang believes that demand-side stainless steel and new energy will increase significantly in 2022, in which the increase in demand for new energy may exceed traditional areas. The increase in global stainless steel production is mainly due to the commissioning of replacement capacity in China, the new stainless steel capacity in Indonesia and the resumption of production capacity in other parts of the world. Global stainless steel growth of about 6 per cent in 2022 is expected to lead to an increase in nickel demand of about 100000 tons. Under the global "double carbon" dividend, the field of new energy vehicles is expected to continue the growth trend of 2021. The mileage advantage of high nickel ternary power ensures the incremental demand for nickel metal of global new energy vehicles. It is estimated that the global ternary demand for nickel sulfate will exceed 400000 tons of nickel metal in 2022, and the incremental demand for nickel metal of new energy will exceed that of stainless steel.

According to Wang Weimang, the nickel market demand is mainly concentrated in stainless steel, accounting for about 70%. The output of stainless steel in Indonesia increased significantly in 2021, and the output of stainless steel overseas increased significantly. According to ISSF, in the first three quarters of 2021, global production of stainless steel crude steel increased by about 16.9% to 42.98 million tons compared with the same period last year. Another short-and medium-term demand for nickel in 2021 is new energy vehicles, which currently account for less than 8% of the demand. In recent years, the demand for ternary batteries has increased greatly and the trend of high nickelization is obvious, and it will continue to grow at a high speed in the short term. In 2021, sales of new energy vehicles in China increased by 169% compared with the same period last year. The China Automobile Association expects sales of new energy vehicles in China to grow by 47% in 2022 compared with the same period last year. The growth rate of global new energy vehicle production in 2022 is conservatively estimated at about 50%. The growth rate of demand for stainless steel and new energy vehicles will continue to grow in mid-2022, but with the ebb of global macro-easing, the growth rate is expected to slow, especially for stainless steel.

"Gao Fu Shuai" is still "shining", nickel price variable time point or in the second half of the year?

Finally, let's take a look at the views and investment suggestions of people in the industry on the rise and fall of nickel prices.

Fan Runze believes that from the perspective of global nickel supply and demand, the potential growth rate of supply in 2022 will be higher than that of demand, and the global nickel market may have a glut, mainly from nickel-bearing pig iron, which is still in short supply. In 2022, the supply growth rate of the intermediate-nickel sulfate-new energy industry chain basically matches the demand growth rate, but the total supply is still difficult to make up for the demand for raw materials in the nickel sulfate industry, and nickel will still be consumed as supplementary raw materials in the short term. Until Indonesia's high nickel matte production is released, the demand for nickel sulfate will slow down significantly. There is still a shortage of raw materials for nickel sulfate, and nickel will continue to be de-stocked, and structural supply shortages will help nickel prices to maintain a strong pattern at least in the first half of 2022. However, in the second half of the year, as the wet process and high matte projects in Indonesia are put into production or reach production, the removal of nickel will slow down or turn to accumulation again, and the focus will be on the change of explicit nickel inventory.

Zhou Weigang said that based on the judgment that the supply of the nickel market for the whole year of 2021 is too tight to remove the warehouse, the electric nickel will continue to be strong in the first half of 2022, the high Back structure under low inventory will continue, and the short positions will be carefully arranged before the inventory inflection point appears, while long kinetic energy needs to grasp the rhythm of the current coordination.

"Nickel City in 2022 will be another year full of crises and opportunities. The fundamental supply and demand pattern of the nickel market will tend to be loose, and global explicit inventories are expected to bottom out as ferronickel and high matte are put into production. It is suggested that investors in the nickel market should grasp the contradiction of low nickel inventory in the first quarter of 2022 and the transaction value brought by the inflection point of nickel price in the second quarter. " Shao Wanfu said.

Wang Weimang said that in recent transactions, bullish factors have been over-digested in a relatively short period of time, and the subsequent sharp fall in nickel prices should arouse everyone's vigilance. Due to the remaining temperature of overseas macro policies and the gap between supply and demand, nickel prices will remain strong in the first quarter of 2022. In the short term, the domestic market has the behavior of seasonal overhaul and production reduction of stainless steel in January, and there will be a light seasonal demand during the Spring Festival holiday. At the same time, at a time when nickel prices are rising rapidly, the desire for nickel sulfate and nickel ore prices to follow is not strong, and nickel prices may be adjusted again after adjustment, and investors should pay attention to risk aversion when fluctuations intensify before and after the Spring Festival.

Nickel
low inventory
2022
outlook
market

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