Nickel Prices to Move Downwards amid an Expected Increase in Electrowinning Nickel Output

SHANGHAI, May 16 (SMM) - Affected by the sharp decline in nickel prices in early April, the profit margins of electrowinning nickel produced with MHP or nickel sulphate dropped, arousing market worries about the delayed commissioning of new electrowinning nickel capacity, which was in turn bullish for nickel prices. In terms of fundamentals, the spread between SHFE 2304 and 2305 contracts was wide in the first half of April, so most traders included NORNICKEL nickel as the source for warrant delivery, which, coupled with the closed import window, tightened the pure nickel supply in China. However, with the warrants against the delivery of SHFE 2304 contract flowing into the spot market in late April and the imported pure nickel under long-term contracts into the domestic market, the pure nickel supply became abundant. On the demand side, pure nickel demand from the military alloy companies was high, but due to wild fluctuation in nickel prices, the actual transactions were thin.

In May, about 1,500 mt of imported pure nickel was cleared, and the spot supply tightness eased with the inflow of warrants against the delivery of SHFE 2304 contract. The NORNICKEL nickel premiums thus plunged into a free fall. Pure nickel consumption by the high-temperature alloy sector increased driven by a large number of domestic nuclear power and other projects launched in 2023. In addition, some enterprises that planned to maintain normal production during the Labour Day holiday mainly purchased Jinchuan nickel plates. Moreover, some new projects owned by large stainless steel mills were put into production in May, which may push the 300-series stainless steel output up to a record high. In general, SMM presumes that nickel prices will remain rangebound in May amid a slight improvement in downstream demand. However, in the long run, the possible increase in electrowinning nickel output will drag down nickel prices.