SMM Nickel Supply-Demand Forecast in 2022-2026, with Pure Nickel Expected to Be Oversupplied in H2

SHANGHAI, Jul 18 (SMM) – Abnormal moves of nickel prices this year were pinned by an extreme high of $100,000/mt, with various LME-priced raw materials being significantly impacted in March, April and May. During this period, the maximum discount of nickel pig iron over pure nickel reached 120,000 yuan/mt in nickel content, which was eventually maintained at 70,000-80,000 yuan/mt, resulting in a sharp decline in the use of pure nickel by many mills with the lowest application rate at 2-3%.

The nickel sulphate segment was equally gloomy. Some companies signed long-term orders using LME pricing, which later incurred huge losses in March, April and May.

Indonesia NPI accelerates its taking over of domestic NPI market amid oversupply

In terms of NPI, the production through electric furnaces in China was 180,000 mt in Ni content in 2014, but the market was overturned afterwards. With the active investment of domestic manufacturers in Indonesia, the production in the country caught up with that in China. The blast furnace production process was later used to mainly produce low-grade NPI, with an annual output of around 80,000 mt in Ni content. RKEF is still the mainstream production process in China, while SMM believes that the production will fall further in the future. In 2022 in the case of high demand, the production is estimated at 340,000 mt in Ni content, which will gradually fall to 250,000 mt in Ni content in the positive scenario.

Indonesia's production is expected to be 2.1 million mt by 2023, and this is without the supporting thermal power plants being installed timely. The overall domestic operating rates will be around 40%, while Indonesia's will be 90%, with cost being the single reason for such a huge difference. In the long run, SMM believes that there is still more room for the cost to decline, but in general the domestic cost is still higher.

Supply-demand balance

Domestic NPI demand is still increasing, and the application rate and domestic stainless steel production is both rising. SMM believes that in the long term, more domestic stainless steel mills will go abroad. On the other hand, SMM believes that domestic NPI prices will drop in the long run with thinner profits. The precursor production will also maintain growth in the long term.

Nickel sulphate production is also on the rise. The precursor sector carries some growth potentials on the demand side, which mainly targets the China market as the precursor is oversupplied overseas. The coefficient MHP is growing, so is the demand for nickel briquette. Intermediate products prices will fall amid oversupply. The problem for black mass lies in insufficient capacity in the near term. High-grade nickel matte, though the palpable production growth can be expected, will be slow in ramping up the production. For nickel briquette, domestic production has been contained, while the production overseas has been rising. On the whole, domestic demand for briquette has dropped compared with last year, but added on the basis of 2020.

Q: What about the primary nickel supply-demand balance in 2025 and onwards?

A: SMM believes the situation of oversupply is on the way. But the market share of primary nickel will be grabbed by the growing recycling industry. SMM believes that the market players will gradually adjust to oversupply, with the prices stabilizing in a narrow range.

Q: How is the nickel sulphate supply-demand balance in the precursor segment without considering NPI oversupply?

A: Nickel sulphate is also expected to be oversupplied. Nickel briquette alone is unable to meet the demand in the new energy sector even if the global production is poured into this sector. Though we are concerned about the commissioning progress of nickel sulphate capacity, we do not think there will be a major problem.

Q: Is nickel sulphate being affected by US Fed rate hike?

A: Yes. Global commodity demand will face the same issue with similar trends.

Q: How about pure nickel supply-demand balance in the mid-term?

A：I think pure nickel supply will become surplus in the second half of the year, but it is uncertain when it will emerge.

Q: Will high-grade nickel ore be depleted in the future?

A: I do not think so. Indonesia is quite abundant in natural resources.