The global nickel market is expected to record a modest 70,000 tonne deficit in 2018 on the back of strong stainless steel production growth, Denis Sharypin, Nornickel head of market intelligence, said at Metal Bulletin’s International Nickel Conference in Toronto (May 31-June 1).
Nornickel, the largest refined nickel and palladium producer in the world, forecasts nickel demand will increase by 8% to 2.332 million tonnes this year based largely on a 130,000 tonne increase in Chinese and Indonesian stainless steel production and 38,000 tonnes in new battery demand.
“Stainless steel is going to continue to be the main driver of demand growth. Batteries may be growing at a very fast pace but it’s still from a very low base,” Sharypin said.
Meanwhile, global nickel supply is seen rising 10% to 2.253 million tonnes in 2018. The biggest sources of new supply will be China and Indonesia, which are expected to increase NPI output by 112,000 and 60,000 tonnes respectively this year.
Looking further ahead, Nornickel believes that batteries in electric vehicles (EVs) will be a major long-term generator of demand with an annual battery nickel growth rate of 24% from 2017 to 2025. This would equate to 440,000 tonnes of new nickel demand by 2025.
But, even with this significant incremental demand growth, it will be several more years before the market truly faces a major supply squeeze because NPI production expansions will free up a share of class 1 nickel that otherwise would have been used in stainless steel.
Additionally, near-term deficits can be filled by the over 300,000 tonnes of nickel that currently sits in London Metal Exchange and Shanghai Futures Exchange warehouses.
“We think there are sufficient stocks to cover the deficit through 2021. But after that, things get interesting,” Sharypin said.
After the global stocks are depleted, the market will require higher prices to stimulate production growth from new nickel sulfide or high pressure acid leaching (HPAL) projects, which are capable of producing class 1 nickel needed for battery applications.
Sharypin noted that it is uneconomical to process ferro-nickel or NPI into nickel sulfate that is required for battery manufacture. The EV-battery market needs tier class 1 material, sourced from mined nickel sulfide ores.
But only a handful of possible sulfide projects have been identified, and each of those would take six to seven years to bring to market, while HPAL projects are expensive to build and could lead to sulfuric acid bottleneck.
Sharypin, along with other panelists at the International Nickel Conference, suggested that current LME nickel prices of $15,000 per tonne are not enough to attract more investment in nickel mines and production. It will likely take at least 12 to 24 months of nickel prices at $18,000 per tonne to support class 1 capacity expansions.