SHANGHAI, Jan 4 (SMM) - The nickel prices surged again last night with the engagement of capitals. SHFE nickel once reached as high as 234,000 yuan/mt, and the LME nickel touched a high of $31,900/mt. According to SMM data, the current LME nickel warrants still stood at a historically low level, so a market speculation was very likely. At the same time, the LME liquidity had not yet recovered, which was why the nickel prices saw wild swings and spikes.
As the trend of pure nickel futures prices gradually deviated from the fundamentals, it became more difficult to trade commodities based on LME prices, such as MHP, high-grade nickel matte, FeNi, etc. Over the past many years, overseas nickel futures have been used as benchmark to price various raw materials, including nickel hydrometallurgy intermediate products, high-grade nickel matte, ferronickel, and nickel pig iron. However, when extreme market events occur, the enterprises that have signed contracts to purchase the above-mentioned raw materials to produce finished products will have to suffer huge losses if they could not cancel the orders or renegotiate the prices. In fact, the losses could amount to their cumulative revenues of the past several years.
Taking nickel sulphate as an example, the terminal purchasing demand for nickel sulphate precursors was relatively weak during 2022, so the high costs of raw materials failed to be transmitted downstream. At the same time, the new energy vehicle subsidies were to be removed at the end of the year, which further undermined the competitive advantage of automobile using ternary precursors. The poor demand forced the prices of upstream salts and raw materials to go down, and the influence of nickel prices on the prices of nickel sulphate and its raw materials weakened. The discounts of battery-grade nickel sulphate to refined nickel continued to expand. It is expected that nickel sulphate will see a palpable surplus in 2023 due to the mismatch between capacity and demand. In addition, the increase in the capacity and output of pure nickel will slow down the growth of the high nickel prices. Therefore, the discounts of battery-grade nickel sulphate to pure nickel will drop, but are unlikely to turn into premiums.