Rising Nickel Sulphate and NPI Supply May Weight on Nickel Prices

SHANGHAI, Jul 7 (SMM) - High nickel matte: The output of newly commissioned high-grade nickel matte capacity in Indonesia was around 8,000-10,000 mt in Ni content. Legions and Huayue is also putting hydrometallurgical intermediates capacity into production, with a monthly output of around 5,000 mt in metal content. Therefore, the supply of raw materials for nickel sulphate has been sufficient. The hydrometallurgical intermediate products produced by Legions and Huayue in Indonesia are mainly shipped back to China, with the supply expected to reach 14,000-15,000 mt in metal content. However, the current domestic demand for intermediates is only about 12,000 mt in metal content, and the situation of oversupply will lead to accusation of stocks.

Nickel sulphate cost: Based on the latest pricing method, the cost of using hydrometallurgical intermediate products will be lowest, and black mass is also cost efficient. Nonetheless, the actual cost will depend on the recycling value of each lithium salt factory. The prices of high-grade nickel matte have been high as the supply is mostly in the form of long-term orders. Producing nickel sulphate with nickel briquette is the least cost effective, which will be affected by the prices of futures. In other words, using briquette as the raw material will incur losses based on the prices of nickel sulphate between 38,000-39,000 yuan/mt. In the future, the supply of intermediate products will see a surplus, reserving rooms for further declines in the raw material cost. Hence SMM believes that the prices of nickel sulphate will drop to some extent.

Operating rates of nickel sulphate: The production lines are actually not convertible. For example, the production lines using intermediate products as the raw material may be able to process some scrap, but could not be used to dissolute nickel briquette or high-grade nickel matte. In other words, they are relatively independent. There are currently three major types of production lines based on the raw materials. The first type is for intermediate products and scrap, as they are convertible to some extent. The other two are for nickel briquette (powder) and high-grade nickel matte respectively. The production of nickel sulphate using intermediate products is estimated at 12,000 mt in metal content, while the actual output in June is 11,000 mt in metal content, as some salt factories in Shandong shifted their focus on refined nickel. Hence the operating rates of intermediate products were nearly 100% in June, compared to less than 50% in the same period last year. Of course SMM thinks the capacity of the intermediate products is flexible, because some factories can overproduce a little bit. The operating rates of nickel sulphate using nickel briquette have dropped from 80-90% in 2021 to less than 30% recently. For high-grade nickel matte, though its production has rose to around 10,000 mt in metal content, the application rate was low. In other words, high-grade nickel matte has been accumulating.

Supply: In the short term, nickel sulphate production will continue to rise. The production based on high-grade nickel matte is still relatively low at present, and there is some room for growth. The supply of nickel sulphate will continue to increase in the long run, and we believe that production and demand in the second half of the year will be balanced and grow at the same time.

The output of stainless steel using imported NPI will continue to increase as NPI prices have been falling amid absolute oversupply of Indonesia NPI. Currently, the proportion of NPI in the stainless steel raw material portfolio is around 65%, which is expected to rise to 68% by the end of 2022. Falling NPI prices may cause collapse to stainless steel cost. Furthermore, the NPI price cut is being transmitted to the ore side. Stainless steel futures and spot prices are falling, even against the backdrop of a sharp drop in in-plant steel inventories carried by mills in June. Nickel prices are also likely to fall, unless the dissolution of nickel briquette rises in the case of failure in intermediate capacity growth and slower-than-expected ramp-up of high-grade nickel matte production lines. Nonetheless, nickel prices will fall as a whole regardless of falls or gains.