Will China’s nickel sulfate price bottom out amid increased feedstocks and weak demand?
Increased supply of alternative feedstocks, along with weak demand, has caused the China domestic nickel sulfate price to trend down since hitting a record high on April 22.
Fastmarkets assessed the price of nickel sulfate min 21%, max 22.5%; cobalt 10ppm max, exw China at 42,500-43,000 yuan ($6,336-6,411) per tonne on Friday June 10, narrowing down by 1,000 yuan per tonne from 42,500-44,000 yuan per tonne a week ago and down by 1,500- 3,000 yuan per tonne from 44,000-46,000 yuan per tonne a month earlier.
The downtrend has been mainly driven by lower production costs due to increased supply of feedstocks such as mixed hydroxide precipitate (MHP) and nickel matte, Fastmarkets learned.
China imported 68,477 tonnes of nickel intermediates - mainly MHP - in April, up by 25.25% month on month and up by 205.06% year on year. The country imported 12,948 tonnes of nickel matte in April, up by 22.9% month on month and up by 1,139.7% year on year, according to Chinese customs data released on May 23.
“More MHP has come from the ramping up of Indonesian MHP projects in the last two months, along with increased nickel matte from Tsingshan this year, leading to a possible surplus of feedstocks for nickel sulfate,” a Chinese battery raw materials producer told Fastmarkets.
“I even heard that some producers are selling their nickel sulfate to South Korea given increased supply [of nickel sulfate] and the recent weak demand in China - previously China barely exported any nickel sulfate,” he added.
“We’re beginning to hear that participants [in China] are now trying to renegotiate contracts for raw materials such as MHP due to increased supply in the market,” one source told Fastmarkets earlier this month.
The increase in available MHP in the spot market has weighed on payables for the material, which have fallen to 65% LME nickel in domestic China from 90% LME nickel earlier in 2022, sources said.
Rapid growth in intermediate production
According to Fastmarkets research, there has been significant growth in the production of MHP, nickel matte and mixed sulfide precipitate (MSP), particularly in Indonesia.
Production forecast figures for 2022 show that nickel matte production has increased by 24% since 2011, from 417,800 tonnes to a projected 518,000 tonnes in 2022. MSP recorded similar growth, with production increasing by 37% to 113,500 tonnes in 2022, from 82,600 tonnes in 2011.
The biggest growth, however, was in MHP, where production increased by 1,691% from 10,700 tonnes in 2011 to a projected 191,700 tonnes in 2022.
“Historically MHP has come up against technical challenges, which have resulted in delayed ramp-ups or plants never reaching nameplate capacity,” Fastmarkets battery raw materials analyst Jordan Roberts said.
“Thankfully, with the latest generation of plants in Indonesia, these technical challenges appear to have been overcome and we have a much higher degree of confidence in the ability of the plants to ramp-up to nameplate capacity,” Roberts added.
Growth is set to increase further, with production forecasts for 2025 showing a 47% increase in matte production, a 25% increase in MSP production and a 106% increase in MHP Production.
The increased feedstocks have changed China’s nickel sulfate producers’ preferences for raw materials. Producers are now opting for these intermediate products over other routes to sulfate such as nickel briquettes, which are more costly.
Fastmarkets assessed the nickel min 99.8% briquette premium, cif Shanghai at $450-500 per tonne on May 31.
“MHP will be the predominant feed source moving forward because it’s generally less expensive to produce than briquettes, powder or oxide and it behaves in a similar manner in that it can be dissolved in the same equipment at the same rates,” Roberts said.
“Despite MSP having the higher nickel content (~55%), MHP is favored because it requires lower capital cost - no H2S plant is required. It’s a simpler and safer process, with easier materials handling, and removes the use of flammable hydrogen gas, which is an explosion risk,” he added.
“In the past two months, around 60% of a single nickel sulfate producer’s output used either MHP or nickel matte as raw materials, while only 20% of the raw materials are nickel briquettes,” a nickel sulfate producer told Fastmarkets.
“One year ago, the proportion for nickel briquettes [as raw materials] was up to 80%,” he added.
“We believe that it’s possible for China’s nickel sulfate producers to not use nickel briquettes as raw materials at all in the future considering the large volumes of MHP and nickel matte,” an industry analyst agreed. “Meanwhile, the nickel sulfate price will still have a large space to fall given the decreased raw materials cost because of the significantly increased supply.”
New projects and capacity added
There have been a number of project announcements and capacity increases for nickel intermediates in recent months.
Chinese nickel products provider Lygend Mining started trialling a second MHP nickel autoclave in Indonesia at the end of 2021.
The project originally included two phases, with two autoclaves operating in Phase I aiming for a capacity of 36,000 tonnes per year of MHP. Phase II would have a third autoclave operating, which would have brought the total capacity to 54,000 tpy of MHP. The third autoclave was originally expected to be set up in May 2022.
However, the company has now expanded the project to eventually include six autoclaves, with a production guidance of 120,000 tonnes by the third quarter of 2023, with each line producing 19,000 tonnes of nickel in MHP per year at steady state.
On April 20, another Chinese battery raw materials maker Huayou Cobalt also successfully ran a nickel sulfate trial production by using nickel matte and self-produced MHP from its Huayou project. It aims to produce 50,000 tonnes nickel sulfate per year.
Earlier this year, Tsingshan delivered a first batch of nickel matte to Chinese battery raw materials producer CNGR Advanced Material, while other Chinese battery material providers also reported that they received offers for nickel matte from Tsingshan, Fastmarkets learned.
There has also been an increase in integrated nickel sulfate production in Indonesia, with companies such as Britishvolt, Hyundai, and Volkswagen all having signed agreements in principle to produce the battery raw material in Indonesia.
Outside of Indonesia, South Korea-based SNNC, a joint venture between POSCO and Société Minière du sud Pacific, have increased their Gwangyang plant production capacity to enable production of nickel matte, which will be converted to nickel sulfate at POSCO’s neighbouring plant.
The plant has a production guidance of 21,000 tonnes of nickel matte per annum from 2023.
With more Indonesian projects for nickel sulfate and nickel matte starting production, the domestic nickel sulfate price may come under further pressure.
Some sources believe that a strong pick-up in demand from the EV sector following China’s easing of its Covid-19 lockdowns could stabilize the price and provide support despite increased feedstock supply.
Chinese automotive output and sales increased month on month in May after the government boosted its efforts to encourage a market recovery, but fell year on year, the China Association of Automobile Manufacturers (CAAM) said in its latest monthly report on June 13.
Chinese EV sales reached 447,000 units in May, up by 49.6% from April and up by 105.2% year on year. EV output reached 466,000 units, up by 49.5% month on month and up by 113.9% year on year, according to CAAM.
“Demand has improved recently - but not as fast as we expected - while government support still takes time. A true recovery might be expected in the third quarter of 2022,” a nickel sulfate buyer told Fastmarkets. “Meanwhile, with the decreased nickel sulfate price, the EV selling price for some car makers might also be adjusted to attract more consumers.”
Market participants also pointed out that although the nickel sulfate price may hit a floor in the future, it will take time given the low liquidity under the weak demand in the market.
“The nickel sulfate price is still highly related to the nickel price on London Metal Exchange (LME), so you also need to [consider] whether the LME nickel price will keep falling,” Fastmarkets senior analyst Vicky Zhao also commented.
“Other markets such as stainless steel and high-temperature alloy, which actually [consume] more than 80% of nickel, also need to be considered. Once demand from others [weakens], the LME nickel price will decrease further and so will the nickel sulfate price,” she added.
The LME three-month nickel official price closed at $25,857 per tonne on Wednesday, June 15, down by 10.4% from $28,855 one week earlier.