SHANGHAI, Nov 25 (SMM) – Indonesia is likely to overtake China to become the world’s largest producer of nickel pig iron (NPI), a major feedstock for producing stainless steel in 2020.
"The ban on nickel ore exports by the world’s top nickel ore producer in Southeast Asia, effective from January 2020, looks set to send Chinese NPI producers in raw material shortages next year," said Rachel Liu, senior nickel analyst, SMM at China Nonferrous Metal Industry Annual Meeting 2019 and the 2020 (SMM) Metal Price Forecast Conference in Shanghai last Friday.
China’s NPI production will decline 13% to 510,000 mt in Ni content in 2020, after an increase of 28% this year amid high profits, eased environmental restrictions and new capacity. "Chinese NPI producers are likely to see their production costs exceed 1,300 yuan/mtu next year, as prices of nickel ore rise,“ Liu added.
Output from Indonesia is expected to soar 51% to 530,000 mt in Ni content, as China’s Tsingshan and Delong will sharply expand their capacity in the Southeast Asian country and as high nickel prices may spur the resumption of closed blast furnaces.
With overall NPI production growth slowing to 10%, global production of primary nickel is estimated to grow 5% to 2.62 million mt in Ni content in 2020, and output from China and Indonesia will account for 50%.
In 2019, global production of primary nickel jumped 11% to nearly 2.5 million mt in Ni content, with NPI taking up 38% and pure nickel accounting for 37%.This left the global nickel market in a slender deficit this year as consumption came in at 2.52 million mt in Ni content with 67% used in stainless steel.
China remained the top nickel consumer, accounting for over 50%, while its stainless steel sector took up 80% of its nickel consumption.
The nickel deficit is expected to widen further, as supply grows slower and demand maintains solid growth. This, coupled with low inventories, is set to help lift nickel prices in 2020.
Liu expects the three-month LME nickel to move between $14,000-20,000/mt in the year ahead. "Beijing’s push for infrastructure projects to improve people’s livelihood and protect environment as well as energy and petrochemical projects will be the major drivers of stainless steel consumption in China, which is estimated to grow 6% in 2020, compared to 6.5% in 2019."
Global electrification, meanwhile, will continue to bolster demand for nickel. Nickel consumption in electric vehicle batteries is expected to grow to 90,000 mt in 2020, up 30,000 mt from 2019.
Correction: The article was updated to correct the nickel consumption change in electric vehicle batteries from 2019 to 2020.
