Rapid Expansion of Electrowinning Nickel Production Capacity Casts a Huge Influence on the Nickel Market

SHANGHAI, Feb 20 (SMM) - Discounts of pure nickel over nickel sulphate have been shifted to large premiums since the extreme price move of nickel in 2022. Many Chinese nickel salt enterprises resumed their pure nickel production lines after mid-June 2022. At the same time, driven by the high premiums of refined nickel over nickel sulphate, many domestic companies began to build new electrowinning nickel capacities in 2022. These new capacities are expected to be released successively in 2023 and 2024. SHFE nickel was greatly affected by the shortage of deliverable goods. The expansion of electrowinning nickel capacity has attracted the market's attention to the pure nickel sector.

1. Electrowinning and electrorefined nickel

In addition to pure nickel and electrowinning nickel, terms such as refined nickel, electrorefined nickel, nickel briquettes, nickel powder, nickel plates, etc. also exist in the nickel industry. What is the relationship between them?

In fact, the pure nickel (in 100% Ni content) does not exist from the perspective of actual production. What the market calls pure nickel is actually equivalent to refined nickel. Electrowinning nickel, electrorefined nickel, nickel briquettes, nickel powder, etc. all belong to the category of refined nickel. However, the smelting methods, finished product content and final form of various types of "refined nickel" are different. This article mainly talks about the electrowinning nickel. What are the differences between electrorefined and electrowinning nickel?

Differences in production process: In electrorefining, the high-grade nickel matte anode plate processed from nickel sulphide concentrate or high-grade matte nickel is used as a cathode, which is electrolysed and refined in sulphate solution, and the cathode is slowly dissolved and precipitated at the anode. During this process, the impurities in the raw materials are also removed by diaphragm electrolysis process to obtain pure nickel. In electrowinning, the cathodes cannot dissolve. The nickel metal in the electrolyte slowly accumulates in the anode.

Differences in raw materials: In electrorefining, raw materials with higher Ni content are usually used as the main materials. For example, nickel sulphide concentrate, high-grade nickel matte, nickel sulphide, etc. In electrowinning, the raw material is usually non-nickel sulphide, such as nickel hydroxide, nickel carbonate, nickel sulphate, etc., which are characterised by being easy to dissolve in acid. If the nickel-based raw material is a sulphide, which is not easy to dissolve in acid, it needs to go through a high-pressure reactor and pressurised acid leaching. The process of producing electrowinning nickel with high-grade nickel matte belongs to this category.

Differences in end applications: Due to various production methods and electrolyte systems, there will be some differences in the quality of finished products. Electrowinning nickel circulated in the market before was mostly used as raw material for processing stainless steel, while electrorefined nickel was mostly used in high-end fields such as electroplating and high-temperature alloys. At present, the quality of most newly-built and re-produced electrowinning nickel enterprises in China mostly uses NORNICKEL nickel as the standard. For instance, high-temperature alloy uses the Jinchuan nickel plates as the raw material because of its particularity of application and usage. The use of Jinchuan nickel plates accounts for 78.43% of the total nickel consumption by alloy sector, while the proportion of NORNICKEL nickel stands at 21.57%.

2. Analysis of electrowinning nickel output growth

According to SMM research, Chinese refined nickel output will reach 275,100 mt in 2023. Among them, the new and converted electrowinning nickel production capacity is 51,300 mt, accounting for 18.65% of the total capacity. In 2024, the new electrowinning nickel production capacity will be further expanded. It is conservatively estimated that the total refined nickel capacity in China will reach 309,100 mt in 2024. Among them, 85,300 mt of new and converted electrowinning nickel production capacity will be added, and the proportion rises further to 27.6%. In addition, there are also new large refined nickel projects overseas in 2023, which involve fewer enterprises compared to the expansion of electrowinning nickel capacities in China.

According to SMM research, in 2023, the new global electrowinning nickel production capacity will account for 8.2% of the total refined nickel production capacity. In 2024, the new global electrowinning nickel production capacity will grow to 10.26% of the total, which is mainly contributed by the expansion of production lines in China. From 2023 to 2024, the volume of newly added refined nickel capacities at home and abroad is huge, and the supply and demand of refined nickel will change in the future. 

3. Analysis of the driving forces for electrowinning nickel production

Production expansion of electrowinning nickel is driven by profits.

So far, materials for electrowinning nickel are primarily nickel sulphate or MHP and high-grade nickel matte (raw materials for nickel sulphate). In China, to produce electrowinning nickel using MHP and high-grade nickel matte means the two raw materials shall first be processed to generate nickel sulphate solution. Compared to nickel sulphate crystal sold in the market, the solution is spared the process of crystallisation.

Generally, there are five different materials for the production of electrowinning nickel, namely, outsourced high-grade nickel matte, outsourced MHP, outsourced nickel sulphate, self-produced high-grade nickel matte/nickel sulphate and self-produced MHP/nickel sulphate. According to SMM survey, the costs based on different materials are shown in the figure below.

Note: Since electrowinning nickel is regarded as equivalence to Norilsk nickel in most cases, its prices thus refer to the import prices of SMM #1 nickel.

It can be seen from the figure above that no matter what materials are used to produce electrowinning nickel, the profits will be ample if the products are sold at reasonable prices. That explains why so many enterprises scramble to expand their electrowinning nickel capacity.

Production expansion of electrowinning nickel is driven by company's stratigic planning

The adverse impacts from the abnormal swings of nickel futures in 2022 have persisted for roughly a year up to date. The liquidity of LME nickel has not recovered yet, and the spot market has been beset with the frail connection between spot prices and futures prices. The development of spot market is also hampered by the derivatives market Small number of deliverable cargoes remains a critical factor to disrupting nickel prices. Therefore, for both nickel market stability and market players, it is imperative to increase deliverables. And for production-oriented enterprises, the ability to produce deliverable products and register as a deliverable brand is a prerequisite for its solid development in the long run.

4. Impacts of the increase of electrowinning nickel on the current nickel market

Impacts on nickel products

It is mentioned that nickel futures prices have hovered at highs for a long time due to limited number of derivatives, while the disconnection between futures prices and spot prices also become prominent. Take NPI and nickel sulphate as examples, the two major products in the nickel market were traded at large discounts over pure nickel in 2022. The increase in electrowining nickel implies that more MHP, high-grade nickel matte and nickel sulphate will be devoted to its production. In this way, once nickel sulphate is again traded at large discounts over pure nickel, the production of electrowinning nickel will be boosted, thus narrowing the price gap. It is the same case with NPI. Up to date, some NPI capacity are successfully switched to high-grade nickel matte, which provides an approach to adjusting the supply and demand of NPI. Since high-grade nickel matte can be used to produce electrowinning nickel, the capacity expansion of high-grade nickel matte also suggests that the price gap between NPI and pure nickel will enter a cyclical fluctuation within a certain range

Impacts on global trades of pure nickel

As mentioned before, electrowinning nickel shares the prices of imported nickel. If the domestic electrowinning nickel quality could be improved to rival that of imported nickel, then before the new electrowinning nickel products are registered as deliverables, chances are that electrowinning nickel in China will be traded at discounts over SHFE nickel amid fierce market competition.  This suggests that the imports of pure nickel in China will be reduced with its market share taken by electrowinning nickel. The overseas pure nickel that used to flow into Chinese market might have to turn to other international markets or be delivered to warehouses.

Impacts on nickel prices

First, let's take a look at the downstream sectors of pure nickel. In 2022, squeezed by secondary nickel and scrap, the purchases of pure nickel in China's stainless steel sector was mainly based on rigid demand. In the future, the increase in domestic pure nickel demand will solely depend on the expansion of stainless steel sector itself. However, the overseas stainless steel market still has high demand for pure nickel.  In terms of new energy sector, nickel briquette has been gradually ruled out for its poor cost effectiveness as materials. It is estimated that the global consumption of nickel briquette and nickel powder in new energy sector may slip from 120,000 mt in Ni content to 60,000-70,000 mt in Ni content. Since the performance of the electroplating sector is mediocre with limited increase forecast, detailed analysis will be omitted. But it is worth pointing out that the alloy sector will become a downstream sector with largest potential in the future. In 2022, the global pure nickel consumption of alloys was about 400,000 mt in Ni content. Given the geopolitical factors, it is expected that pure nickel consumption in the military alloy sector will increase further. In conclusion, the pure nickel demand will merely stem from the alloy sector expansion and recovery of overseas stainless steel sector. From 2023 to 2024, it is forecast that pure nickel will face a surplus based on existing capacity release schedules. As a result, nickel prices will face downward pressure. The figure below shows the supply and demand forecast of pure nickel in the Chinese market in the coming months. It is shown that even with a sharp decline in imports, the domestic social inventory is still anticipated to climb. 

Electrowinning nickel will stir up waves in the already volatile nickle market. In the long run, the new electrowinning nickel production lines will have a positive effect on the stability of the nickel market. However, the prices of nickel products that serve as raw materials in producing electrowinning nickel, including nickel sulphate and MHP, are bound to rise. The nickel prices will move sideways in the short term. SMM will track the new capacity of electrowinning nickel projects and its impact in the future.