Nickel prices tumble on expectations of easing supply tightness

Nickel prices on the Shanghai Futures Exchange (SHFE) fell sharply on Friday January 6, with the weakness coming amid expectations of increased supply of nickel plate from Chinese stainless steel and nickel giant Tsingshan Holding Group

The most-traded February nickel contract on the SHFE closed at 210,200 yuan ($30,547) per tonne on Friday, January 6, down by 4.6% from the previous day’s close of 220,290 yuan per tonne and 8.1% lower than the close of 228,820 yuan per tonne on January 3.

Similar weakness has been seen in nickel prices on the London Metal Exchange, with the three-month benchmark closing down by 6.8% day on day at $27,748 per tonne on Thursday. The LME nickel price had ended the first trading day of 2023 at $31,118 per tonne.

“The nickel price falls are mainly due to the news on Thursday that Tsingshan has succeeded in producing nickel plate in China. The new project, with a monthly output of 1,500 tonnes, has not yet reached its designed capacity, but it’s still big news for the market [because] it means more spot availability of class 1 nickel in the future,” Yang Xiya, nickel analyst at Zijin Tianfeng Futures, said.

“In the short term, however, the nickel market will still remain in short supply with limited output expected from the project, and this will leave the market in a deficit in the first quarter [of 2023]. [The deficit] will likely decrease from the second quarter onward, with more output available,” Yang added.

Yang expects the SHFE nickel price to trade between 180,000-240,000 yuan per tonne during the first quarter.

The news comes at a time when low supply and limited liquidity in the nickel market have been driving volatile moves in prices, leading market participants to say that prices have decoupled from actual demand in the physical market.

“We hope the coming of new nickel full plates [from Tsingshan] could bring more liquidity to the market, so that [nickel] prices won’t be that volatile,” a Shanghai-based producer source said.

Trading volumes for the LME nickel contract have remained notably depressed since the three-month price briefly surged above $100,000 per tonne in March 2022, causing the exchange to suspend nickel trading. Asian trading has yet to resume, while import activity in China has also been muted by large arbitrage losses and limited interest from market participants due to the price volatility.

Fastmarkets’ calculation of the nickel import arbitrage averaged a loss of $315.11 per tonne during the first three trading days of January 2023, compared with an average loss of $1,202.91 per tonne in December 2022.

The sustained arbitrage losses and a general unwillingness to trade nickel among market participants has caused premiums for the material to stagnate in recent months.

For instance, Fastmarkets’ weekly assessment of the nickel min 99.8% full plate premium, cif Shanghai stood at $350-450 per tonne on Tuesday, unchanged since September 20, 2022.

Stainless steel futures in China, meanwhile, were marginally higher on Friday, with the most-traded February SHFE stainless steel contract ending the day at 16,705 yuan per tonne, up by 0.6% from 16,600 yuan per tonne at the previous day’s close.

“The impact on stainless steel makers, if any, will only be felt after Chinese New Year (January 21-27), when stainless steel makers initiate another round of raw material purchases, mainly for NPI (nickel pig iron),” a nickel trader said.

NPI is a cheaper alternative to pure nickel, such as nickel full plate, for the production of stainless steel.

Most stainless steel mills in China have already completed their restocking purchases ahead of the holiday in late January, with some having already sent their workers home ahead of the break, market participants said.

The resultant weaker demand for NPI has caused prices for the raw material to decline in recent weeks.

For instance, Fastmarkets’ weekly price assessment for nickel pig iron, high-grade NPI content 10-15%, contract, ddp China stood at 1,360-1,380 yuan per nickel unit on December 30, down by 10-20 yuan per nickel unit from 1,380-1,390 yuan per nickel unit on December 23.

To keep track of all the latest developments in the nickel market, head to our dedicated nickel market page.

What to read next
The publication of Fastmarkets’ MB-PB-0086 lead 99.99% ingot premium, cif India and MB-PB-0087 lead 99.97% ingot premium, cif India assessments for Tuesday November 5 were delayed due to a reporter error.
Lithium prices have fallen significantly, putting the cost of cells at 7.5% of the price of an EV as of August 2024 (Tesla Model 3 Base, USA), down from 15% in January 2023. Find out how falling raw materials prices are impacting auto OEMs and reshaping global EV pricing strategies
African material will remain part of the tantalum supply chain regardless of the lithium market, according to Ian Margerison, executive marketing manager at the Tantalum-Niobium International Study Center (TIC).
Sluggish demand for China’s graphite flake fines in both the batteries’ anode and refractories sectors has led to ongoing output cuts among flake miners and processors, which has further tightened the supply of large flake graphite in China, sources told Fastmarkets.
The growth in Chinese shipments of batteries for energy storage systems (ESS) is far outstripping the growth in deliveries of batteries for electric vehicles (EVs), sources told Fastmarkets in the week to Friday November 1.
China and India are ramping up electrical steel production through new joint ventures and acquisitions to meet rising global demand and sustainability goals.