Ni & Co CONFERENCE: Nine key takeaways from Xiamen

Fastmarkets summarizes nine key points from Antaike’s Nickel & Cobalt Conference on November 6-8.

The spotlight was in Xiamen last week when market participants gathered to discuss hot topics in the cobalt and nickel markets, including higher cobalt prices and their impact on the market in addition to new trends for the cobalt industry.

High prices do not hurt the overall use of cobalt in consumer electronics
Cobalt prices hit a near 10-year high in April, but the blue metal’s high prices will not lead to many cobalt substitutions in consumer electronics, according to battery manufacturer ATL’s procurement director, Xu Shihui.

Cobalt demand from the consumer electronics industry will continue to grow due to new trends, including the intact adoption of lithium-cobalt-oxide (LCO) batteries in laptops and smart phones.

High cobalt prices boost cobalt recycling in China
The persistent cobalt price rally since mid-2016 has triggered a cobalt recycling boom in the past year.

Cobalt is mostly recycled from consumer electronics in China, while hard alloys have also been largely recycled for their cobalt and tungsten content.

There will be much more than 10,000 tonnes of cobalt recycled in China this year, according to Ou Hancheng, general manager of Ganzhou Highpower Technology.

Chinese cobalt producers operate at a loss

The widening price variation between Chinese and international cobalt prices has meant a majority of cobalt producers have been operating at a loss since the beginning of summer.

High import and domestic production costs for cobalt as well as sluggish demand in China have resulted in spot prices drifting below input costs, a trend that should persist for a while, according to Liu Lei, cobalt analyst from Beijing Antaike Information.

“Gross profits for cobalt sulfate producers have narrowed quickly since March. With a persistent softening market in China, spot sales prices for cobalt sulfate have been way below production costs,” Liu told delegates.

Katanga’s sales suspension is a reminder of how quickly the cobalt market can change
Meanwhile, on the conference sidelines, there was news on Tuesday from Glencore’s Katanga Mining that it would suspend cobalt exports and sales from Kamoto in the Democratic Republic of Congo, which gave some sought after, and somewhat guarded, optimism to 2019 contract negotiations.

Market participants have forecast a meaningful surplus of cobalt hydroxide next year due to the supply response to the increased demand from the burgeoning battery and electric vehicle (EV) sector.

Hydroxide percentage payables against the metal price have already suffered, and while prices have not had a reactive turnaround to the Katanga news, it is a reminder of the market’s delicate supply fundamentals, which forced delegates to pause and consider that the path for 2019 is not set in stone.

Expectations of a nickel price rise on descending stocks
Current global nickel briquette capacity is at around 200,000 tonnes per year, with nickel stocks on the LME at around 220,000 tonnes and 75% being briquette, according to Xu Aidong, chief analyst of Beijing Antaike Information.

“LME nickel stocks may see a continuous decline in 2019 if nickel sulfate output is ramped up next year because nickel sulfate producers will use existing nickel resources, including briquette stocks, until 2020, which explains why people expect the nickel price will rise,” Xu said.

On the other hand, others wary of the impact of rapid production increases on prices
Chinese nickel demand is expected to rise following a pronounced stainless steel production expansion, however, the resulting aggressive investment in nickel projects may cap higher nickel prices.

“For nickel, the competition created by all this new capacity will be fierce, so the price is unlikely to rise too much,” Song Quanming, from the Nickel Institute said.

Indonesian NPI ramp-up to accelerate nickel output; Chinese NPI well supported by Indonesian ore exports
The International Nickel Study Group (INSG) expects nickel mine production to reach 2.3 million tonnes in 2018, an increase of 6.7% from 2017, with output expected to reach 2.4 million tonnes in 2019.

The growth in nickel mine production will come from Indonesia to feed its domestic nickel pig iron (NPI) production and exports. The INSG also expects NPI production to reach 740,000 tonnes of nickel in metal in 2018 and 830,000 tonnes in 2019 globally.

New NPI projects are ramping up in Indonesia, while in China, the abundant availability of Indonesian-origin laterite ore will support NPI production growth, according to the INSG.

Stainless steel continues to be dominant user for nickel
By 2021, stainless steel will occupy 77% of global nickel usage, while 8% of nickel will be employed in the EV sector, compared with less than 4% this year, according to Xu.

Over 2017 to 2021, primary nickel usage is expected to increase at annual pace of 5.6%, the highest of all base metals, Xu said.

The EV sector is estimated to grow 29% annually over 2017-2021, while stainless steel output will grow modestly at 3.3%, according to Xu.

Scrap stainless steel consumption in China higher than 2017, though not matched with overseas

In China, stainless steel output is expected to reach around 26 million tonnes in 2018. While as for its nickel-containing raw materials, scrap stainless steel grew from last year and accounts for 16-18% of feedstock due to China banning the production of substandard steel and, thus, opening up scrap stainless steel – substandard steel’s key feedstock – into the market, Xu said.

“Despite China’s scrap usage growing, its [market share is] still a lot smaller than proportions overseas, which is usually 60-70% or 70-80%,” according to Xu.