Softening Chinese demand pressures nickel sulfate, MHP markets
Weakening demand from the Chinese market put pressure on battery-grade nickel products in the week to Friday, December 2, with domestic nickel sulfate prices, nickel mixed-hydroxide precipitate (MHP) payables and international nickel sulfate premiums all declining during the period
Chinese nickel sulfate price slides
Nickel sulfate prices in China tumbled in the week to December 2, ending an uptrend that had been in place since July 29, amid mounting pressure from downstream production cuts, market sources told Fastmarkets.
Fastmarkets’ weekly price assessment for nickel sulfate, min 21%, max 22.5%; cobalt 10ppm max, exw China was 39,500-40,500 yuan ($5,671-5,814) per tonne on December 2, down by 1,000-1,500 yuan per tonne from 41,000-41,500 yuan per tonne on November 25.
Offers ranged between 40,000 and 41,000 yuan per tonne during the week, with deals heard within this range. But sentiment in the market was bearish due to ongoing production cuts in downstream markets, particularly among battery makers, sources said.
And while market participants said demand was still relatively healthy, downstream battery makers were heard to have halted their operations for a variety of reasons.
“I’ve heard the orderbooks were still strong but [battery makers] were cutting production to resist [elevated] upstream prices, mainly the lithium price,” a producer source said, adding that the length of the production cuts would depend on the lithium price.
Elevated lithium prices have led more battery makers to cut their production in the face of high costs, according to market sources, but prices have softened in recent weeks owing to reduced demand and caution among buyers.
“It’s also the season to liquidate inventories. Plus, there’s the upcoming cancelation of [electric vehicle (EV)] subsidies toward the end of the year, so I don’t think the situation will improve until next year,” the producer source added.
China’s EV subsidy program comes to an end on December 31, 2022, and vehicles purchased after this date will no longer qualify for subsidies.
On the other hand, market participants also noted that the high input costs facing nickel sulfate refineries could lend some support to the weakening market, though conceded that the market would likely continue to weaken in the coming weeks.
“Nickel sulfate refineries are losing money again given MHP payables were still high in November, but regardless this won’t change the market’s downtrend in the near term,” a consumer source said.
MHP payables drop on rising LME price
Higher underlying prices on the London Metal Exchange pressured MHP payables downward in the week to December 2 while participants began to reassess pricing strategies for the market.
Fastmarkets assessed the nickel mixed hydroxide precipitate payable indicator, % London Metal Exchange, cif China, Japan and South Korea at 74-78% on December 2, down from 79-82% on November 25.
Bids were reported to Fastmarkets at the bottom of the range, with second-hand liquidity reported at 74% and as low as 71%.
Participants told Fastmarkets that the MHP market was coming under “extreme pressure” as a result of decreasing demand from Chinese nickel sulfate producers, as well as the high LME prices which were said to be suppressing demand and forcing participants to look at alternative pricing benchmarks.
The official LME nickel cash price closed at $27,878 per tonne on December 2, up by 9.5% from the previous week.
On the demand side, a producer source told Fastmarkets that “our understanding is that [nickel] sulphate producers have full product stock and no buyers, so have stopped purchasing raw materials”, noting that this issue was also impacting cobalt demand as well.
There are reports in China that some of the major battery producers were cutting production capacity up to 30% on the nickel rich cathode production lines.
These fears of demand destruction in the market have largely offset concerns over shortages of supply in MHP which had previously been driving payables higher.
Despite the decrease in payables, the expressed price for MHP shifted higher on December 2 due to a significant increase in the underlying LME price month on month.
The intended purpose of the expressed price is to reflect if the market deviates from the use of LME as the underlying basis for payables. Though some participants reported that they were looking at alternative pricing mechanisms for MHP, no confirmed levels were reported to Fastmarkets.
In the absence of data reported in this format, the expressed price continues to reflect the assessed payable level of the previous LME official nickel monthly average.
Fastmarkets calculated the nickel mixed hydroxide precipitate expressed price, cif China, Japan and South Korea at $18,682-19,692 per tonne on December 2, up by 8.71% from $17,320-17,978 due to a 15% increase in the monthly average between October and November.
International nickel sulfate market begins to diverge
Demand pressures from China were also impacting the international nickel sulfate market, where participants noted that premiums were diverging between China and Japan/Korea.
With demand said to be poor in China, some participants began to peg lower premiums for the Chinese market. However, others noted that premiums as high as $1,600 per tonne were achievable in Japan and South Korea.
As a result of the declining demand from China, Fastmarkets assessed the nickel sulfate premium, cif China, Japan and Korea at $1,450 per tonne on December 2, down by $50 per tonne from $1,500 per tonne on November 25.
The international nickel sulfate premium is now at its lowest ever level since Fastmarkets began assessing the market in April 2021.
Participants were said to be weighing the impact of the various routes to sulfate on the premium element, with class-one nickel commanding very different levels to class-two nickel as a result of input costs.
Higher underlying LME prices also impacted the international nickel sulfate market, despite the falling premium element of the calculation.
Fastmarkets calculated the price for nickel sulfate, cif China, Japan, and Korea at $6,141 per tonne, up from $5,988 per tonne on November 25.
Fastmarkets calculated the weekly average of the LME nickel cash official prices at around 2.7% higher compared to the previous week, with the LME average for November 25-December 1 standing at $26,090.50 per tonne, compared with $25,395.50 per tonne for the five trading sessions to November 25.
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