FOCUS: Questions arise after Tsingshan announces new nickel matte technology
Fastmarkets examines these questions following Tsingshan’s announcement – believed to be a game changer for the nickel market - mainly focusing on the EV demand outlook, raw materials and the implications on exchanged-traded nickel pricing in the future as well as some uncertainties.
Nickel matte has suddenly gained a lot of market attention after Chinese stainless steel producer Tsingshan Holding Group announced it would supply the material to Huayou Cobalt and CNGR Advanced Material amid the booming electric vehicle (EV) market.
Rosy outlook from EV push remains, but class 1 nickel demand outlook dims
Output and sales of new energy vehicles (NEVs) in China set a new record high in 2020, with NEV sales expected to reach 1.8 million units in 2021, compared with sales of 1.37 million units last year, China Association of Automobile Manufacturers (CAAM) said.
Even considering the impact of the coronavirus, global pure EV (PEV) sales should have grown by 32% in 2020 and will rise by 43% year on year in 2021, William Adams, head of Fastmarkets’ battery raw materials research team, said.
A robust recovery of the global electric vehicle (EV) market in 2020 boosted confidence that the market would grow in 2021 and nickel, as one of the key raw materials in EV batteries production, is a favorite of investors, which has allowed the metal to outperform its peers.
The rising momentum, however, came to a halt following Tsingshan’s new technology announcement, which reported it would produce nickel matte from laterite ore for use in nickel sulfate production.
Tsingshan’s new technology will open a door to battery-grade nickel supply and ease market concerns of a shortage of battery materials, Fastmarkets learned.
“The [EV] market outlook remains good but Tsingshan’s new technology means more raw material choices for [nickel sulfate] producers to choose from and this may reduce market share of class-1 nickel, mainly nickel briquettes and powders,” one Chinese nickel sulfate producer said.
“We see continued growth of class 1 nickel consumption in EV sector in 2021, and may mainly happen during January-October, but once Tsingshan’s matte is available, this may change the picture,” Fastmarkets’ analyst Vicky Zhao said.
China’s usage of class 1 nickel in EV sector is estimated at 30,000-40,000 tonnes (nickel contained) in 2020, up from a rough figure of 25,000 tonnes (nickel contained) in 2019, Vicky added.
In China, nickel sulfate producers mainly use mixed hydroxide precipitate (MHP), nickel briquettes/powders and recycled materials for production, and among these, Chinese nickel sulfate producers favor MHP due to its cost competitiveness.
But the robust demand from the automobile market since last July, concurrent with reduced MHP supply due to a production suspension at one of the main suppliers, have tightened MHP supply, which also made the material very expensive, sources said.
Accordingly, nickel sulfate producers started looking for nickel briquettes, as class 1 nickel with a nickel content of over 99%, to feed their production.
The nickel briquette price was then boosted amid stockpiling demand ahead of the Chinese New Year holiday (February 11-17) so the supply of nickel briquettes will remain tight short term, sources said.
Fastmarkets assessed the monthly nickel min 99.8% briquette premium, cif Shanghai at $160-200 per tonne in January, up by $60-80 per tonne (63.6%) from a month prior, while the market remained stable in February in a thin market, with Chinese market participants away for the holiday.
Fastmarkets’ price assessment for nickel sulfate min 21%, max 22.5%, cobalt 10ppm max, exw China was 35,000-38,000 yuan ($5,404-5,867) per tonne on February 26, up by 1,000-3,000 yuan per tonne (5.8%) from 34,000-35,000 yuan per tonne on February 19.
More feedstocks for nickel sulfate production, uncertainties
Tsingshan’s technology breakthrough could encourage more availability of raw materials for nickel sulfate production in the future, but market participants in the Chinese nickel sulfate market do not seem that excited due to the presence of many uncertainties before this is fully realized, Fastmarkets learned.
“It’s big news for the industry but [matte material] will not be out until October and we still need time to see if the material can feed the plant well so we’ll continue to source MHP as our key feedstock in the near term,” a second nickel sulfate producer said.
“The nickel [futures] market is responding very fast to the news but there are still lots of uncertainties, such as costs. Is it a more competitive price against other raw materials? Also how many producers will upgrade their production lines to use matte for [nickel sulfate] production? And so on,” a third producer source said.
Tsingshan expects its nickel equivalent output to reach 600,000 tonnes in 2021, 850,000 tonnes in 2022 and to jump to 1.1 million tonnes by 2023. The company also said it would adjust its output of nickel matte and nickel pig iron (NPI), based on market demand and prices.
NPI, which replaces refined nickel as the key input for stainless steel production in China, will also experience a change in market dynamics after Tsingshan’s technology announcement, with Indonesia surpassing China as the world’s number one NPI producer in 2020.
China imported 3.44 million tonnes of NPI/ferro-nickel in 2020, up by 79.89% year on year, while Indonesia’s material imports came to 2.73 million tonnes in 2020, up 99.6% from a year earlier, according to China Customs data.
Fastmarkets price assessment for nickel pig iron, high-grade NPI content 10-15%, spot, ddp China was 1,200-1,210 yuan per nickel unit on February 26, up by 50-60 yuan per nickel unit (4.8%) from 1,140-1,160 yuan per nickel unit a week earlier.
Nickel price tumbles on Tsingshan’s news, looking for new ‘balance’
Nickel prices on both the Shanghai Futures Exchange and London Metal Exchange took a bad hit following the news.
The SHFE nickel price tumbled on Thursday March 4, with the SHFE March nickel contract closing at 130,320 yuan per tonne on March 4, down by 7,630 yuan per tonne from a day earlier - the lowest since February 5, 2021.
LME nickel also slumped on the same day, with its three-month price ending at $16,191 per tonne, down by $1,673 from Wednesday - the lowest since December 7, 2020.
“For now, the message to the market is that the premium within exchanged-traded nickel (part of the class 1 family) should largely disappear due to [Tsingshan’s] new technology,” ING’s senior commodities strategist Wenyu Yao said.
“Until a new market equilibrium is found, exchange-traded nickel looks bearish in the short term,” Yao said.
“The price reaction to Tsingshan’s news reminds me of when NPI first appeared in the market 10 years ago and the market needed to look for a new ‘balance’ to price in while lots of things were changing,” a Shanghai-based nickel trader said.