SHANGHAI, Feb 3 (SMM) - Price trend of nickel throughout 2022 can be divided into the following four stages. In the first quarter of the year, nickel prices moved abnormally, once hitting a record high in early March. In the second quarter, the prices gradually returned to the fundamentals under the influence of the pandemic outbreaks and macro factors. Since the middle and late third quarter, the prices have rebounded amid the growing demand from the stainless steel and new energy sectors. In the fourth quarter of 2022, affected by the price difference between domestic and overseas markets, the import window remained closed, which, coupled with the pre-Chinese New year holiday restocking of some companies, tightened the spot supply and pushed up the nickel prices. Many investors also have doubts about the trend of nickel prices in 2023. SMM makes predictions of nickel prices in 2023 from three aspects, namely, changes in the pure nickel supply in the world, changes in the pure nickel demand and changes in pure nickel stocks.
In 2022, Chinese refined nickel output totalled 174,100 mt, up 8,651 mt from 2021. Jinchuan Group’s annual refined nickel output added more than 1,000 mt because of the improvement of the alloy sector in the year. Besides, pure nickel prices still stood high after the extreme price moves of SHFE nickel, which brought losses to the nickel salt plants. The high pure nickel prices encouraged some Chinese salt factories to either resume the production of pure nickel or build new pure nickel production lines. In early 2023, Jinchuan Group closely followed the market demand orientation and proposed to increase the annual refined nickel output by 6,000 mt. In January 2023, the company successfully ramped up the refined nickel output by 600 mt. It is expected that Chinese refined nickel output will keep growing in 2023. In the overseas market, the global pure nickel output was still on an upward trend in 2022 even though no new pure nickel capacity was built. In 2021, the industry suffered from labour shortages caused by the spreading COVID-19. In addition, the groundwater irrigation of the Norilsk mine also caused a significant reduction in the production of pure nickel in 2021. According to POSCO, a new high-purity nickel refinery (with an annual output of 20,000 mt of pure nickel) whose product is served for processing secondary batteries will be built at Gwangyang Iron and Steel Plant, and the construction will be completed by the end of 2023. Similarly, Tsingshan Group also plans to build a pure nickel smelter in Indonesia, with an annual production capacity of 50,000 mt, which is expected to be put into production in 2023, Therefore, the current global pure nickel production capacity will keep climbing. Based on the operating rates of overseas enterprises over the years, the production of refined nickel smelters is relatively stable except for uncontrollable factors. And the production growth is also expected to remain positive.
On the demand side, in the nickel sulphate sector, the growing intermediate product output reduced the nickel briquette demand from the nickel sulphate companies, and the pace was accelerated by the price hike of pure nickel in March 2022. Volume of pure nickel used in the production of nickel salt in China may drop to 10,400 mt in 2023. In the stainless steel sector, NPI gained higher cost efficiency owing to its large supply surplus. Although the commissioning of some production lines was postponed in 2022, the supply surplus of NPI remained unchanged, thereby squeezing the demand for pure nickel and others from the stainless steel sector. Different from the pure nickel demand from the new energy and the stainless steel sectors, the use of pure nickel in the alloy sector grew. In 2020, the Central Committee of the Communist Party of China proposed the 14th Five-Year Plan (2021-2025), which pointed out the goals of improving the quality and efficiency of national defence and military modernisation, promoting the modernisation of weapons and equipment, focusing on independent innovation and original innovation of national defence technology, and accelerating the development of strategic frontier subversive technology and intelligent weapons as well as equipment. During the entire “14th Five-Year Plan” period, the release of military supplies and domestic aircraft will continue to boost the demand for alloys, thereby propping up the consumption of pure nickel. In the first quarter of 2022, the pure nickel demand from the alloy sector dropped 11% compared with that in the fourth quarter of 2021 but grew 8.18% YoY as the nickel prices once surged in the year. The pure nickel demand then grew after the nickel prices fell. According to SMM research, the largest domestic alloy sector is high-temperature alloy, accounting for 75.5% of the total, followed by corrosion-resistant alloys which accounts for about 9.9%. In addition, electrothermal alloy, magnetically soft alloy, expansion alloys and alloy wielding rod account for 3.6%, 2.5%, 2.3% and 0.6% respectively based on their application fields and consumption of alloy. High-temperature alloy is high-temperature resistant and is widely used in engines, gas turbines, etc. Therefore, the rapid development of China's aviation industry and munitions during the 14th Five-Year Plan period will also push up the consumption of pure nickel.
In terms of inventory, due to the extreme price moves in March 2022, the spot pure nickel prices soared, and at the same time, the prices of nickel-based raw materials such as nickel concentrate and high-grade nickel matte ballooned, which further led to the shutdown of some domestic refined nickel companies and suppressed some downstream demand. SMM data showed that as of the end of March 2022, domestic nickel plate inventory was 13,000 mt, which was about 3,000 mt higher than that in January. The import volume of nickel briquette stood at around 11,000 mt in March despite the higher nickel briquette prices than nickel sulphate that was caused by the abnormal price moves, but in April, the imports declined to around 7,000 mt. Therefore, the bonded zone inventory remained low in March. And the pure nickel inventory did not drop sharply owing to the pandemic control measures in the Shanghai bonded zone after the extreme price moves ended. Pure nickel stocks did not fall greatly because of the COVID-19-related closed-loop management. In 2023, due to factors such as the increase in the profit of refined nickel production and the downstream rigid demand, there will be a production resumption of refined nickel and the construction of new production lines at home and abroad. And some production lines are in normal operation. Besides, pure nickel consumption by the steel mills and the nickel briquette demand in the nickel sulphate producers are on a downward trend. Therefore, in 2023, the overall pure nickel inventory may rise.
In terms of fundamentals in 2022, the US Fed continued to raise the interest rates to temper inflation. The global economy was in recession, and overseas consumption, especially in European countries, slumped, while nickel consumption performed relatively well. The two major downstream markets, the stainless steel and new energy industries both maintained positive growth, and the nickel demand in the latter burgeoned by more than 30% year-on-year. Nickel demand from the military alloy sector grew apace, while that from the electroplating sector performed poorly during the year. In 2023, the market may witness a significant supply surplus of primary nickel, especially the NPI. Besides, the refined nickel supply will also be in surplus. Moreover, the Indonesian government’s potential export tax hike on nickel products may affect the rhythm of NPI production and cause oversupply. Under the influence of fundamental and macro factors, nickel prices will fluctuate wildly with a high probability and will trend lower amid the expected surplus in 2023.