Review of Refined Nickel Market in 2022 and Outlook

SHANGHAI, Dec 29 (SMM) - 2022 was a volatile year for nickel prices. The nickel prices hit a record high in early March, and fell back in the second quarter of the year.  The influence of the Covid-19 pandemic combined with the macroeconomic factors sent nickel prices to return to fundamentals.

In the second half of the third quarter, steel mills resumed production due to previous sharp declines in the supply and the depletion of inventories. High stainless steel output improved demand for nickel. In addition, the new energy industry began to see rapid growth in the third quarter, and the operating rates of battery manufacturers increased amid improved orders. Leading precursor plants expanded their capacity rapidly due to previous destocking. The strong support for nickel from new energy bolstered nickel prices to rally from lows.

In the fourth quarter, affected by the price difference between domestic and overseas markets, the import window remained closed. That, coupled with pre-holiday restocking of some companies, kept spot pure nickel supply tight, keeping nickel prices strong.

On the macro front, the global economic growth rate has returned to the pre-COVID-19 level in 2022. But due to the impact of a series of easy monetary policies implemented overseas to revive the economy, European and American countries are in a state of high inflation. In order to reduce inflation, the Federal Reserve raised interest rates in March, May, July, September and December 2022. The competitiveness of the US dollar in the international market has been further strengthened. Global safe-haven funds flowed into the United States while liquidity continued to weaken, which suppressed commodity prices.

From a fundamental point of view, at the end of the first quarter, the LME nickel inventories continued to fall. This, together with concerns over nickel supply resulting from the conflict between Ukraine and Russia, pushing up LME nickel prices to a high of $100,000/mt. SHFE nickel prices also rose by their daily limits. Despite the introduction of negative policies such as the deferred delivery on the LME and SHFE, demand for pure nickel weakened noticeably.

In 2022, the establishment of production lines of intermediate products and the increase in output weakened the demand for nickel briquette from nickel sulphate. And the rise in the prices of pure nickel in March has also accelerated this process.

Although there is still a bottleneck in the production capacity of the MHP acid-soluble production lines, the output is expected to increase after the first quarter of 2023. The amount of pure nickel used in the production of nickel salt in China may drop to 27,600 mt by 2026.

For the demand from stainless steel, the large surplus of NPI has ensured strong cost-efficiency of NPI among the nickel raw materials of stainless steel. Although the commissioning of some NPI production lines was postponed in 2022, the NPI surplus could remain in the foreseeable future, thereby squeezing the demand for pure nickel and other nickel raw materials in the stainless steel industry.

According to SMM statistics, the proportion of pure nickel in global stainless steel primary nickel raw materials in 2022 stood at 3.32%, and it is expected to drop to 2.44% in 2026. On the contrary, the proportion of NPI in global stainless steel primary nickel raw materials will increase from 66.70% in 2022 to 74.36% in 2026 thanks to the strong cost-efficiency.

On the supply side, it is estimated that the global pure nickel production will reach 840,000 mt in 2022 due to production resumption and new refined nickel production lines. The output of pure nickel will reach 910,000 mt in 2026. Therefore, there will be a surplus of pure nickel.

To sum up, for the overall nickel fundamentals, the performance of nickel was still relatively good in 2022 under the background of the Fed’s continuous interest rate hikes to curb inflation, the global economic recession, and the sharp decline in overseas consumption, especially in European countries.  The military industry drove a significant increase in the alloy sector during the year, and only the electroplating industry performed poorly. There will be a significant surplus of primary nickel in 2023, especially for NPI. 

Refined nickel will also see a surplus. Nickel sulphate is unlikely to see a significant surplus in 2023. In addition, the Indonesian government is expected to impose export taxes on nickel products, and this would affect the commissioning of NPI capacity and the surplus.  The global economic environment in 2023 will still be pessimistic. In this scenario, nickel prices should experience great volatility and may continue its downward trend amid an expected surplus.