Geopolitical issues still have an impact on commodity trade. The Group of Seven (G7) has expanded sanctions on Russia and will continue to reduce Russia's income from the metals trade. Here’s how the geopolitical issues have changed nickel trade in 2023 and the trend of nickel prices.
As one of the world's largest nickel producers, Russia's Norilsk accounts for nearly 18% of global nickel production. In 2022, its main consumers were Netherlands (49%) and China (36%), followed by the US (10%). In the first quarter of 2022, Russia exported 1,681 mt of pure nickel to the US, while exports in the third quarter to the US climbed to 3,994 mt.
In 2023, Russian nickel exports to the Netherlands dropped to zero, and the proportion of exports to the US has also dropped from 12% in January to zero. As geopolitical tension intensifies, the United States has increased its imports from Canada while lowering its imports of Russian nickel. The proportion of Canada’s exports of pure nickel to the United States rose from 42% in January to 48% in February, which is basically in line with SMM's expectations.
China's electrowinning nickel production capacity will explode during 2023-2024. With slow growth in downstream demand for pure nickel, the competition between Russian nickel and electrowinning nickel in China may be particularly fierce in the next two years.
Nornickel has introduced a mixed pricing mechanism for China, which also means that China's share in Russian nickel consumers will continue to increase. According to trade flow data, China's share was only 36% in 2022, and rose to 61% in January 2023. The share dropped to 51% in February, though. From the second half of 2022 to the first half of 2023, many domestic enterprises commissioned electrowinning nickel production lines.
With price advantages, the downstream market's acceptance of new electrowinning nickel has increased significantly since 2023. Therefore, the market competition between Russian nickel and electrowinning nickel will become particularly fierce in 2023. This resulted in a lower share of Russia’s exports to China in February 2023.
Both geopolitics and fundamentals have played a key role in the change of nickel trade flow. How will the change in trade flow affect domestic and overseas nickel prices? First of all, from the domestic point of view, as mentioned in the previous article, China’s share of Russian nickel exports has shown an upward trend, but compared with the data in 2022, the total amount of Russian nickel imported by China in January and February 2023 is 4426 mt. February fell by 32% (2077 mt).
According to SMM data, the total amount of new electrowinning nickel in China in 2023 is 3,300 mt, so the feedback to the social inventory data of pure nickel shows that there is no sign of accumulation in January and February. However, it is worth noting that China's electrowinning nickel production is currently in the climbing stage, and this balance may be broken.
Although the G7 countries boycott Russian metals, imports of Russian metals by other countries increased. Therefore, the demand for pure nickel in various countries is still stable. The impact of G7 sanctions on nickel prices will be relatively insignificant, unless Russian metals are banned at main LME warehouse.
In summary, there will still be a surge in the output of electrowinning nickel in the future, and the global oversupply of pure nickel and primary nickel will remain. Nickel prices should remain in a downward track in the foreseeable future.
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