Supply, demand and costs led to a rally in nickel sulphate prices [SMM Analysis]

SHANGHAI, Sep 19 (SMM) – Currently, tight spot supply of nickel sulphate, triggered by fallout of supply, demand and costs, gave a boost to nickel sulphate prices. On September 19, the price trended higher to 31,900-32,400 yuan/mt.

Fundamentally, with sustained nickel sulphate price erosions from late July to early August, profits of salt plants kept narrowing, leading the plants to maintain production of long-term contracts. At the same time, nickel prices remained high, and nickel sulphate prices were 25,000 yuan/mt lower than refined nickel prices, making the use of nickel sulphate to produce refined nickel profitable. When nickel sulphate prices bottomed out, refined nickel manufacturers engaged in dip buying, consuming part of low-priced spot goods. With rigid replenishing demand from cathode precursor makers and stable demand from refined nickel at the end of August, spot stock of nickel sulphate was basically mopped up in August and September.

From the cost side, MHP mentioned last week that nickel sulphate supply stayed tight, and some cargoes from Huafei were unable to arrive at ports on time for some reasons, exacerbating the tight supply. Expectation of high-grade nickel matte supply shortage caused by the Indonesian nickel ore quota issue further increased MHP demand and pushed up raw material prices.

Looking at the future, nickel salt producers suffered heavy losses in September due to long-term profit inversion. In addition, tight supply of raw materials kept raw material costs high. Therefore, some producers will probably turn to production cutbacks and halts. Bolstered by lingering downstream demand, there will be still room for nickel sulphate prices to hike. However, at present, precursor end will fail to keep pace with high-priced nickel sulphate.