BATTERY MATERIALS CONF: Strong demand growth, falling exchange levels a boon for nickel outlook

Healthy growth in nickel demand from the stainless steel and battery sectors and shrinking inventories on the Shanghai Futures Exchange and London Metals Exchange bodes well for nickel prices, according to Macquarie Capital senior commodities consultant Jim Lennon.

“Our view is that, we have these two drivers in demand: stainless steel and batteries, and nickel inventories have been falling over the last few years. I think it will [continue to] fall over the next few years; the nickel market will remain in a deficit between supply and demand, which should push prices higher,” Lennon said at Fastmarkets Battery Materials Conference in Shanghai on Thursday April 11.

Lennon did not give a breakdown of the forecast price at the presentation.

Nickel inventory at both LME and SHFE warehouses have been on a downward trajectory since 2018. LME nickel stocks totaled 182,446 tonnes as of April 1, down by 50% from 368,430 tonnes on January 1, 2018.

Meanwhile, nickel stocks in SHFE-approved warehouses have fallen by 80% over the same period to 9,749 tonnes on April 4 from 48,920 tonnes on January 1, 2018.

Lennon concluded the large stock falls reflect deficits and some financial buying of stocks.

“Last year there’s probably about 50,000 tonnes of inventories transferred from the LME warehouses in Asia into non-reported inventories in Europe, held by banks and traders, partly for reasons of a positive outlook for the market or better premiums in the European area,” Lennon said.

Stainless steel demand still dominates, but EV sector grows faster
Stainless steel takes up 70% of global nickel usage, compared with a small fraction of 6% of nickel used by the electric vehicle (EV) sector, according to Lennon. But EV demand growth is speeding up, he said.

“Total world production of stainless steel in 2016 grew by 8.5%, 2017 by 6% and last year by 5%. This year, our projection is 3.5-4%, so we do see some slowdown but still a steady growth rate. Nickel usage in batteries will grow by 30-40% [in 2019], so the underlying growth in nickel [consumption] continues to be quite impressive,” Lennon said.

Notably, more nickel briquette was used in the EV sector following rising demand for batteries and this has raised the nickel briquette premium over the past year. Fastmarkets MB’s monthly duty-free nickel briquette premium cif Shanghai stood at $240-270 per tonne at the end of March, up from $220-260 per tonne at the launch of the assessment in August last year.

Nickel briquette is the one of the main raw materials of nickel sulfate, a key material used in the production of nickel-cobalt-manganese (NCM) and nickel-cobalt-aluminium (NCA) batteries used in EVs.

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