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Viewpoint: Costs set class 1-2 Ni price spread floor

  • Market: Metals
  • 21/12/23

The price gap between class 1 and 2 nickel has limited room to narrow in 2024 because producers are likely to focus on cost when pricing material in a structurally oversupplied market.

Cost the main driver in class 1-2 spread

Technology innovations have allowed nickel producers to expand their product portfolio.

More producers that previously focused on nickel pig iron (NPI), which is the main class 2 product and typically feeds the stainless steel industry, have begun to process NPI to matte, which is then turned to nickel sulphate or nickel cathode for production of nickel-cobalt-manganese (NCM) batteries.

Nickel cathode, briquette and powder are the reference products for class 1 nickel and they are currently priced at a premium over class 2 products.

The price spread between the London Metal Exchange (LME) class 1 nickel contract and NPI in China fell to 34,070 yuan/t ($4,767.37/t) on 30 November from Yn92,320/t on 1 January. It surged to a record high of Yn109,700/t in March 2022 after an unprecedented event at the LME, which prompted market participants to seek new benchmarks for nickel intermediates such as mixed hydroxide precipitate, matte or even nickel sulphate. Argus, in collaboration with Indonesia's PT Indeks Komoditas, launched the Indonesian Nickel Index (INI) on 3 November for three grades of class 2 nickel and intermediate products. The INI for NPI 10-14pc fob Indonesia fell to $110.70/mtu on 15 December from $131.60/mtu on 3 November.

The decision on whether to process class 2 to class 1 products or stick to class 2 production largely depends on demand and margins. But with expectations of little to no surge in near-term demand for stainless steel and NCM batteries, producers are expected to pay more attention to costs in the coming year, which means that processing costs — about $2,000/t for NPI to matte, $1,000/t for matte to nickel sulphate and $1,000/t for nickel sulphate to cathode — are likely to set the floor for the price spreads among various nickel products.

Nickel producers' appetite to process NPI to matte will fade if the price spread between NPI and nickel sulphate falls below $3,000/t.

Processing costs for NPI to cathode are about $4,000/t or Yn30,000/t. And they are expected to remain relatively stable in the coming years unless there is any major technology breakthrough.

Structural oversupply weighs on prices

Global primary nickel production is expected to rise by 9.1pc on the year to 3.43mn t in 2023, of which 860,000t will be class 1, 2.05mn t class 2 and the rest nickel salts, Argus data show.

The global nickel market is expected to remain in surplus in 2023 and 2024, with Indonesian NPI output estimated at 1.72mn t and 1.78mn t, respectively, according to the International Nickel Research Group.

China's nickel cathode capacity will increase to 350,000t in 2023 and 400,000t in 2024 from 210,000t in 2022, according to companies' announcements. But some projects may not come on line because of the slowdown in demand and increased investment payback period.

The oversupply is echoed in the futures market. On-warrant stocks on the Shanghai Futures Exchange exceeded 13,000t in December compared with below 3,000t in January, while LME stocks rose to 46,014t on 18 December from below 40,000t in June.

China's increased capacity for class 1 nickel by electrowinning and newly registered brands on the LME will add supplies to the spot and futures markets, and in turn weigh on prices. And an expected rise in Indonesian class 2 output in the coming year and mild growth in stainless steel production in China and Indonesia mean that class 2 prices may also come under pressure from abundant supply.

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12/12/25

Australia offers support to Rio Tinto’s Tomago Al plant

Australia offers support to Rio Tinto’s Tomago Al plant

Sydney, 12 December (Argus) — The Australian government has offered support to UK-Australian producer Rio Tinto to operate its 600,000 t/yr Tomago aluminium smelter beyond 2028 through a long-term power purchase agreement. Rio Tinto subsidiary Tomago Aluminium will work with Australia's federal and New South Wales (NSW) governments over coming months on an energy solution to support the 600,000 t/yr smelter from 2028, Australian prime minister Anthony Albanese said today. The deal will include a fixed-price power purchase agreement and a commitment from Tomago Aluminium to invest A$1bn ($670mn) into the plant over 10 years, he added. A long-term power purchasing agreement is in the interest of continued long-term investment into the industrial future of Tomago, Australia's minister of industry and innovation Tim Ayres said at a press conference. But Ayres declined to comment further on the specifics of the deal. Rio Tinto in October warned that it may need to close Tomago at the end of 2028 when its current electricity contract ends because of unsustainable energy costs. It had been looking for a new energy solution since 2022, but was not able to find one, it said at the time. The company began talks with NSW state and federal officials over energy cost support for Tomago in June. It has run the smelter normally over 2025. It produced 426,000t of aluminium on a 100pc basis at Tomago in January-September, down by 2.2pc on the year. Australia's support for Tomago comes one day after Tim Ayres defended the government's industrial policy record. Industrial policy is "a rational, pragmatic response to the acute challenges of this moment," he said at a speech to the Sydney Institute on 11 December. The government's support packages for the Whyalla steelworks , global producer Glencore's Queensland copper operations , and global producer Nyrstar's lead and zinc smelters were informed by its obligation to preserve and strengthen economic conditions for Australian workers, he added. The government may also offer support to another Rio Tinto aluminium smelter. Tasmanian state officials have called on the federal government to back the company's 190,000 t/yr Bell Bay aluminium smelter through low-carbon production subsidies in November. By Avinash Govind Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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News

EU may crank up coal and steel research funds in 2027

11/12/25
News
11/12/25

EU may crank up coal and steel research funds in 2027

London, 11 December (Argus) — The European Commission could fund a much larger share of research in the coal and steel industry from 2027, according to a staff working document published yesterday. The EU Research Fund for Coal and Steel (RFCS) would fund 70pc of corporate research and 100pc of academic research into green initiatives if the EU moves forth with the proposal. It currently funds 50pc of both corporate and academic research projects, but has struggled to attract participants or meet its spending targets, noting that the "underspending of the project is rooted in a lack of attractiveness of certain aspects of the programme". RFCS spent 57pc of its €43mn ($50mn) budget for large coal projects and only 31pc of its €208mn budget for steel research from 2021 to 2024. Brussels, troubled by a lack of applications, consulted companies and academics this year and found that its spending requirements were the largest barrier. Most were unable or unwilling to fund 50pc of large research projects themselves. RFCS has supported a number of groups hoping to repurpose old coal mines for clean energy. GreenJOBS and Mine-TO-H2, two funding recipients, both plan on making green hydrogen from mine water, while GrEnMine received pilot funding worth €3.5mn to research new ways to store gravitational energy in abandoned mines. Others, such as REM and GI-mine, are working on new methods to capture methane from coal mines. In the steel sector, RFCS has awarded funds to hydrogen power projects such as ProSynteg and HYDREAMS and research groups such as BIOCODE, which hopes to replace up to 10pc of the coal in coke ovens with biomass. The EU dissolved the European Coal and Steel Community (ECSC) — an agency tasked with making a common European steel market, which eventually led to the creation of the EU — in 2002. The EU used revenues from ECSC assets to launch and fund the RFCS in the same year, and boosted the programme in 2021 by tapping into the assets themselves. By Austin Barnes Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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ArcelorMittal to raise ferro-alloys surcharge on coil

11/12/25
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11/12/25

ArcelorMittal to raise ferro-alloys surcharge on coil

London, 11 December (Argus) — Leading European steelmaker ArcelorMittal is increasing its ferro-alloy surcharge on flat carbon steel in response to cost rises since the imposition of a new safeguard on the materials. The increases vary depending on product, with bulk commodity volumes likely to see an uptick of just a few euros, while 10-15pc of the company's orderbook could see an additional surcharge of around €10/t. Speciality grades could see even steeper increases, up to €20-50/t for some products. Ferro-alloy prices have risen across the board since the imposition of a tariff-rate quota by the European Commission. Silicomanganese, with a manganese content of 65pc, increased by €175/t between 20 November and 9 December to a midpoint of €1,140/t, according to Argus assessments; over the same period ferro-silicon, with 75pc silicon content, jumped by €317.50/t to €1,525/t, while ferro-manganese increased by €167.50/t to a midpoint of €1,140/t. Some ferro-alloys, such as ferro-manganese, will also be in scope of CBAM, increasing the cost of importing further. Interestingly, some higher-gauge coil products have very steep default values compared with more commoditised grades. For grain-oriented silicon-electrical steel, for example, the default CBAM value is much higher for every country than their respective values for more commoditised steels. Japan, for example, has a default value for HS722511 and HS22611 grain-oriented electrical steel of over 5t, compared with just 2.31t for 7208 products; South Korea has a default value of over 5.85t for both of these products, compared with 2.33t for 7208 products. China, which accounts for most grain-oriented imports, has a default value on these products of almost 9t, compared with 3.82 for 7208 products. The high default value for steel using silicon appears to tie into particularly strong measures the EU is taking to protect its heavily pressured ferro-silicon industry from lower cost, more carbon intensive overseas competition. Under the safeguard measures implemented by the EU last month, ferro-silicon received the most extreme level of support, with its out of quota minimum price threshold set at €2,408/t cif Europe, more than double the spot market price prior to the safeguard's introduction. By Colin Richardson and Ronan Murphy Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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China's CATL to raise $1.4bn to fund battery projects

11/12/25
News
11/12/25

China's CATL to raise $1.4bn to fund battery projects

Beijing, 11 December (Argus) — China's largest battery manufacturer CATL plans to raise up to 10bn yuan ($1.4bn) by issuing five-year bonds, the company said on 10 December. It aims to support project construction and to replenish working capital through the fundraising, said the company. More details, including which projects will be funded, were undisclosed. CATL is the world's largest battery manufacturer, with its power battery installations accounting for 38pc of the global market during January-October, industry data show. It is building several large-sized production projects in China, including the 100 GWh/yr plant in Jining in north China's Shandong province, and a 40 GWh/yr plant in Shandong's Dongying city, as well as a 80 GWh/yr project in Xiamen of Fujian province. The company has also expanded its production outside China. It began constructing a lithium iron phosphate (LFP) battery plant in Spain's Aragon region on 26 November. It also operates a 14 GWh/yr plant in Germany, and is building a 100 GWh/yr plant in Hungary set to start operations in early 2026. A 15 GWh/yr plant in Indonesia is expected to begin production in 2027. CATL's battery installations rose to 210.67GWh in the first three quarters of this year, a year-on-year increase of 33.6pc. Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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US Fed cuts target rate by quarter point: Update

10/12/25
News
10/12/25

US Fed cuts target rate by quarter point: Update

Houston, 10 December (Argus) — US Federal Reserve policymakers cut their target interest rate today by a quarter point, the third reduction of the year, as they focus on shoring up a weakening labor market that they see as a greater threat to the economy than stubbornly elevated inflation. The Fed's Federal Open Market Committee (FOMC) on Wednesday cut the federal funds rate by 0.25pc to 3.5-3.75pc, following quarter point cuts in September and October. In their economic projections, Fed policymakers and governors penciled in a single quarter-point rate cut in 2026 with a similar cut the following year. Median projections forecast the unemployment rate falling to 4.4pc by the end of 2026 from 4.5pc at the end of 2025, with inflation falling to 2.4pc at the end of next year from 2.9pc estimated for the end of 2025. They forecast gross domestic product growth of 2.3pc by the end of next year, up from 1.7pc forecast for the end of 2025. "Near-term risks to inflation are tilted to the upside, and risks to employment to the downside, a challenging situation," Fed chair Jerome Powell told reporters after the meeting. Still, he said, with the target rate now seen to be near "neutral" — meaning monetary policy is neither stimulating nor limiting the economy — "we are well positioned to wait to see how the economy evolves". The Fed is largely operating in an information desert because the 43-day partial federal government shutdown halted the flow of most government economic data, including the vital labor market and inflation reports that are the mainstay of the Fed's dual mandate to maintain maximum employment and stable prices. The latest employment report — September data that was released on 20 November — showed better than expected job growth of 119,000, but that followed initially reported growth of just 22,000 in August and similarly slow growth rates going back to April. Powell said he expected revisions to the labor data to show even slower hiring in recent months. Before the Fed's rate announcement, the CME's FedWatch tool on Tuesday showed an 89.6pc probability of a quarter-point cut, up from 66.9pc odds a month earlier, amid concerns about a slowdown in hiring. Prior to the first rate cut of this year in September, the FOMC had held the target rate unchanged at five meetings this year. Three rate cuts late last year cumulatively cut the rate by 1 percentage point from a near two-decade high, an effort to bring down post-Covid inflation that topped out at 9.1pc in mid-2022. Powell has come under attack from President Donald Trump, who frequently derides him for allegedly being slow to cut rates. He threatened to fire Powell, whose term in office ends next May, and has assigned treasury secretary Scott Bessent the task of interviewing candidates, including current and former Fed officials and governors and economists, to replace Powell. By Bob Willis Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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