China's nickel sulphate market barely balanced in 2020-2022

SHANGHAI, Dec 25 (SMM) – Nickel sulphate market in China and around the world saw a slight surplus in 2019, a SMM survey showed. Consumption weakness in the second half of the year, limited restocking demand at year-end and producers' inclination to firm up offers amid smaller margins resulted in backlogged inventories at nickel sulphate plants, but the overall stocks levels were not high. 

SMM forecasts a roughly balanced nickel sulphate market in China in the next two years, with the annual average surplus standing below 20,000 mt in physical content. 

Global demand and supply balance for nickel sulphate

Prices of nickel sulphate, an essential raw material used in batteries, retreated after a rally this year, as national subsidy cuts for new energy vehicles, starting from June 25, and selloffs of fossil-fuel vehicles squeezed demand for the material in the second half of the year, cutting premiums of battery-grade nickel sulphate against refined nickel. 

But SMM expects the premium, despite moderation, to stay higher than the costs for producing nickel sulphate by dissolving refined nickel in the upcoming two years, suggesting room for profits to produce nickel sulphate with refined nickel as feedstock. 

The production costs of nickel sulphate solution by dissolving nickel briquette/powder stood at 7,000-8,000 yuan/mt in metal content, SMM assessed based on data in 2018.

This compared with estimated premiums of nickel sulphate over refined nickel at 10,000-15,000 yuan/mt in Ni content for the next three years. The premiums narrow from levels in 2018-2019 as an absence of capacity bottleneck will likely keep the nickel sulphate market well-supplied. 

Nickel sulphate supply in 2019-2022

Global capacity of nickel sulphate will likely increase 350,000 mt from a year earlier to 1.39 million mt in 2019, on a physical content basis, with additions in China accounting for 330,000 mt, SMM estimates. 

The capacity will extend its expansion globally in 2020-2022, hitting a total of 2.5 million mt by 2022, with a compound annual growth rate (CAGR) of 12%. 

China’s Jinchuan Group, Jilin Jien Nickel, Australia's BHP, Finland's Terrafame, and Indonesian wet-process projects will contribute to majority of the capacity growth. 

Global production of nickel sulphate is forecasted at 940,000 mt in physical volumes in 2019, with an increase of 25%, down 5 percentage points from 2018. This is largely due to slower output growth in top producer China, which is expected to fall 17 percentage points year on year to 33%.

Reduced demand from China’s NEV market, together with squeezed margins on the back of rising nickel prices, pushed most Chinese nickel sulphate producers into suspension or cutbacks in the second half of the year. 

SMM expects the increase in global production of nickel sulphate to further slow in 2020, to a rate of 9%, amid a reshuffle in the power battery industry as the Chinese government moves to cut its support by fully phasing out NEV subsidies in 2020 and scrapping the list of recommended battery suppliers. 

Production growth of nickel sulphate globally will likely recover above 20% in 2021-2022 as demand expands with the NEV market on track for positive development. 

Global production and capacity of nickel sulphate

Demand for nickel sulphate in 2019-2022

Global production of ternary precursor, which is the major consumer of nickel sulphate, is expected to advance 35%, to 350,000 mt in 2019, SMM assessed. NCM523 and NCM622 account for 67% of the total output with NCM811 and NCA taking up 30%. 

Precursor output in China is estimated to rise 38% on the year to 275,000 mt, with NCM523 and NCM622 taking up 72% while NCM811 and NCA making up only 23%. 

Slow progress towards high-nickel batteries in China after NEV subsidy cuts weighed on the share of precursor NCM811 and NCA. 

SMM estimates China’s production of ternary precursor at 515,000 mt in 2022, with a CAGR of 17% in 2020-2022. 

Global and China’s production of ternary precursor