*Production of refined nickel should improve during the first half of 2022
*The SHFE/LME nickel price ratio bottomed out and the import window re-opened for China
Nickel futures break above $21,200 a ton last week for the first time in a decade supported by low inventories on both the LME and the Shanghai Future Exchange warehouses and expectations that policy easing in China would boost demand for industrial metals. Last year, the price of nickel jumped more than 25%. It was closed $20802 on Friday. The spot market revived as well, with some downstream precursor producers stocking up before the Lunar New Year (January 31-February 4).
China is already easily the world’s biggest market for EVs with total sales of 1.3 million vehicles in 2020, more than 40% of global sales that year. Chinese companies that dominate cobalt mining in DRC (Huayou Cobalt and CMOC) are also increasing investment in nickel extraction and processing in Indonesia”, home to the world’s largest nickel reserves. This means that China is now the largest global market producer of nickel.
In the short-term, according to data released by Fitch Solutions nickel prices are set to weaken during the first half of 2022, as acute market tightness developed throughout October and November 2021 continues to ease. This decline in nickel prices over the first half of 2022 means that prices should average lower over the year to $17,000 ton compared to $18,400 ton in 2021.
In the long term, a shortage of Class 1, battery-grade nickel may encourage automakers to explore lithium-iron-phosphate (LFP) batteries for mass-market vehicles, presenting downside risk to nickel demand for lithium-ion batteries. On the supply side, production of refined nickel should improve during the first half of 2022 in major nickel exports including Indonesia and the Philippines.
The SHFE/LME nickel price ratio bottomed out last week, and the import window re-opened, which improved the profitability of traders. However, the increase in bonded zone inventory was mainly contributed by nickel plant, which may extend into next week, and they are expected to flow to the domestic market directly considering tight domestic supply. The spot premiums were at a high level. Looking into next week, the market shall watch the imports of NORNICKEL nickel, and the premiums.
The nickel prices continued to rise and exceeded 150,000 yuan a ton in China due to the low inventory of pure nickel. Battery industry’s demand for primary nickel will surge by 1.3 million ton in the next decade. The demand was expected to grow by more than 500% or 700,000 ton from 2020 to 2030, and the demand will occupy more than 20% of the total global demand, said BHP Billiton.
According to a previous report from the consulting firm Rystad Energy, global nickel demand was forecasted to rise to 3.4 million tons by 2024 from 2.5 million tons in 2021. In 2024, the global supply will be in short with the production of 3.2 million tons then.
(Disclaimer: This analysis is only for educational purpose and is not and must not be construed as investment advice. It is analysis based purely on economic theory and empirical evidence. Readers are requested to kindly consider their own view first, before taking any position.) Date: 10-1-2021