FOCUS: Will nickel briquette lose appeal as feedstock with Chinese nickel sulfate price declining?

Nickel briquette has steadily become a more favored choice of feedstock for Chinese battery-grade nickel sulfate producers in recent months, resulting in a notable pick-up in spot trading activity for the former.

But recent declines in the Chinese nickel sulfate price have raised questions among market participants about whether this trend will continue.

Fastmarkets examines the major factors behind the robust demand for nickel briquette, and whether it will lose its appeal as a feedstock while the Chinese nickel sulfate price is weakening.

Robust demand, tight MHP supply make nickel briquette a popular choice
Chinese nickel sulfate producers mainly use mixed hydroxide precipitate (MHP), nickel briquette, nickel powders, and recycled materials as feedstock for their production of battery-grade nickel sulfate used in batteries for electric vehicles (EVs).

Of these, MHP is the most popular raw material due mainly to its relatively cheaper price.

Spot demand for nickel briquette had been very quiet for much of the past year, with limited spot buying interest heard. But this changed dramatically late last year following a strong recovery in China’s automotive market in the aftermath of the Covid-19 pandemic.

China’s output of new energy vehicles (NEVs) rose by 7.5% to 1.37 million units in 2020, from 1.24 million units a year earlier, according to the China Association of Automobile Manufacturers (CAAM). Total sales of these vehicles increased by 10.9% year on year to 1.37 million units the same year, up from 1.21 million units in 2019, data from CAAM showed.

Robust demand from the automobile market and reduced MHP supply following a production suspension at one major producer made the MHP very expensive, market sources said.

Payables of MHP have increased to around 84-89% of the London Metal Exchange nickel cash price in a tighter market, compared with about 70% a year ago, Fastmarkets’ senior battery raw materials analyst Vicky Zhao said.

With the Chinese nickel sulfate price setting successive record highs due to expensive MHP and robust demand, market participants began to increase their use of nickel briquette as feedstock for nickel sulfate production.

“Fair enough, especially for those who have nickel briquette dissolution facilities, [as it is] much cheaper by dissolving nickel briquette themselves instead of purchasing nickel sulfate in the spot market after comparing with the firmly-high nickel sulfate price [in the spot market],” a producer source said.

“I heard those [nickel briquette dissolving] lines, that were not in production before, are all reopened due to cost competitiveness, and they don’t need to buy much [nickel sulfate] in the spot market,” a buyer said.

A second buyer echoed this view, saying: “Even for those that don’t have these [nickel briquette dissolving] lines, it won’t take them more than two months to set up, and it is worthwhile to do so.”

This robust demand for nickel briquette has helped stabilize Chinese premiums at elevated levels for the past few months.

Fastmarkets’ monthly assessment of the nickel min 99.8% briquette premium, cif Shanghai, was at $160-200 per tonne on Tuesday March 30, unchanged from January 26, when it jumped by $60-80 per tonne (63.6%) from $100-120 per tonne.

Will nickel briquette lose its shine?
While the use of nickel briquette as feedstock in nickel sulfate production has grown in popularity amid robust demand and a supply shortage of MHP, China’s nickel sulfate market has been weakening against a backdrop of very low spot liquidity lately. This has caused some participants to question whether the higher usage of nickel briquette as feedstock can be sustained.

Cost competitiveness, supply of MHP and demand from the automotive market remain key factors affecting the usage of nickel briquette in production of nickel sulfate, market sources told Fastmarkets.

The cost of dissolving nickel briquette is roughly around 28,000-29,000 yuan ($4,293-4,446) per tonne, according to market participants.

“For now, the domestic nickel sulfate price is falling closer to around 30,000 yuan per tonne, so it might be not very competitive any more by dissolving nickel briquettes into nickel sulfate rather than buying directly from the spot market,” a third buyer said.

“I’d buy directly [in the spot market] if the nickel sulfate price was cheaper, but the auto market is still hot, and whether the [nickel sulfate] price will extend declines or not, this will be a key factor,” he added.

CAAM data showed China’s output and sales of NEVs totaled 533,000 units and 515,000 units respectively during the first three months of 2021, up by 3.2 times and 2.8 times from a year ago.

Meanwhile, the tight supply of MHP is not expected to ease a lot in the short term, and nickel briquette would still be considered a good substitute, market participants said.

“The lack of MHP supply will prompt usage of other raw materials, and nickel briquettes are one of the better choices given its more readily available and easy to dissolve,” a second producer source said.

Also, nickel matte is likely to become a new choice of raw material for nickel sulfate production in the future, with Chinese battery materials producer CNGR Advanced Material as one of new investors in this market.

This came after Tsingshan Holding Group’s announcement that it will supply nickel matte for use in nickel sulfate production to Huayou Cobalt and CNGR Advanced Material from October 2021.

Tsingshan’s announcement of its NPI-to-matte technology helped ease market participants’ concerns of a shortage of battery raw materials, and also put nickel matte under the spot light, but market sources say more time is needed to see if this material will be widely used as one of the key raw materials due to the presence of many uncertainties before this is fully realized.

“More choice will likely come with Tsingshan’s matte coming into market, but it’s too early to make a judgement at present, let’s see how it develops,” the second producer source said.

Fastmarkets assessed the nickel sulfate min 21%, max 22.5%, cobalt 10ppm max, exw China, at 31,000-32,000 yuan per tonne on April 16, up by 500 yuan per tonne (0.8%) from 31,000-31,500 yuan per tonne on April 9.

The latest price remains down by 4,000-6,000 (13.7%) yuan from 35,000-38,000 yuan per tonne on February 26, the highest level since Fastmarkets began tracking the market in July 2018.

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