Weakening demand continues to add pressure to Chinese nickel sulfate, MHP markets

The domestic Chinese nickel sulfate and nickel mixed hydroxide precipitate (MHP) markets continued to move lower in the week to Friday December 9 amid weaker demand and concerns over production cuts in downstream sectors

This appears to also be the same story for MHP, which remains under pressure from elevated London Metal Exchange nickel prices.

Chinese nickel sulfate price extends loss

Nickel sulfate prices in China fell again in the week to December 9 due to continuing production cuts by downstream sectors, market sources told Fastmarkets.

Buying appetite remained low with buyers resisting offers, while sellers were holding onto their inventory amid squeezed margins, resulting in limited spot trading. An isolated deal was heard at 38,000 yuan ($5,454) per tonne, but most participants did not see the market at that level yet.

As a result, Fastmarkets’ weekly price assessment for nickel sulfate, min 21%, max 22.5%; cobalt 10ppm max, exw China was 39,000-40,000 yuan per tonne on December 9, down by 500 yuan per tonne from 39,500-40,500 yuan per tonne on December 2.

Despite elevated nickel prices on paper and high input costs for refineries, softening demand from downstream precursor plants continued to weigh down the nickel sulfate market.

Battery makers in China initially started to cut production in November in anticipation of lower demand for their products ahead of the removal of subsidies for electric vehicles (EVs) at the end of this year.

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.

“The EVs assembled after November 15 were scheduled for sale next year, meaning a complete cancellation of subsidies for buyers then, which largely explains the lackluster demand and declining prices [for nickel sulfate] now,” a producer source said.

Market sources also cited the high prices for nickel as another reason for the weaker demand for nickel sulfate.

The three-month official nickel price on the LME closed at $30,000-30,050 per tonne on December 9, an 11.5% jump from $26,900-26,950 per tonne at the start of the month and an “unbearable” level for consumers, according to market sources.

MHP payables drop further

Continued inflated levels of the underlying LME nickel prices once again pressured the MHP market in the week to December 9, with participants continuing to seek out alternative pricing strategies to hedge against risk.

Fastmarkets assessed the nickel mixed hydroxide precipitate payable indicator, % London Metal Exchange, cif China, Japan and South Korea at 70-74% on December 9, down by four percentage points from the 74-78% on December 2.

Though the market was under pressure, some participants still noted higher offers with some reported to Fastmarkets as high as 77%. But no deals were done at such levels and buying interest among consumers at these levels was said to be limited.

Participants told Fastmarkets that the MHP market could not sustain such high payables in the face of a soaring LME price for nickel.

The official LME nickel cash price closed at $29,837.50 per tonne on December 9, up by 7% from a week earlier.

“Either the LME prices have to drop or the MHP prices,” a Shanghai-based market source said. “Otherwise, it’s hard to operate [nickel sulfate refineries].”

Market sources said that MHP payables at 65% would be the breakeven point for nickel sulfate refineries. But selling interest at such levels appears to be limited with producers, though participants note that it would not be an unprecedented level with such payables occurring following the resumption of trading on the nickel contract in March.

The MHP payable is now at its lowest level since Fastmarkets began assessing the market in late October.

Fastmarkets calculated the nickel mixed hydroxide precipitate expressed price, cif China, Japan and South Korea at $17,672-18,682 per tonne on December 9, down from $18,682-19,692 per tonne on December 2.

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.

Nickel sulfate premiums hold as market continues 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 and South Korea.

With demand said to be poor in China, some participants began to estimate lower premiums for the Chinese market, though others noted that higher levels could be achievable on imports into 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 9, unchanged from December 2.

The international nickel sulfate premium remains at its lowest ever level since Fastmarkets began assessing the market in April 2021.

Liquidity on the international sulfate market remains thin, particularly in the wake of emergence of demand weakness in China. Participants note that long-term contract negotiations remain the focus as the market prepares for the end of the year.

Participants are also 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 have also impacted the international nickel sulfate market.

Fastmarkets calculated the price for nickel sulfate, cif China, Japan, and Korea at $6,723 per tonne on December 9, compared to $6,141 per tonne on December 2 due to an increase of just under 10% in calculated the LME weekly average price.

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

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