Cut nickel cathode supply in Europe is expected to plunge amid more processing capacity cuts in Rotterdam in the Netherlands following the exit of a major operator.
The port of Rotterdam houses two metal warehouse operators that own metal cutting machines and offered nickel cutting services. But one of the operators has informed its customers that it "will no longer cut nickel cathode" in April, market participants told Argus.
Warehouse operators charge a fee to use their cutting machines to process full-plate cathode into smaller 4X4 inches sizes. These 4X4 cut nickel cathodes are widely used by foundries in Europe.
Spot premiums for 4X4 cut cathode in Europe have not increased, despite declining nickel cutting capacity and imminent supply restrictions, because of weak demand. The Argus weekly assessment for the nickel full-plate cathode premium was unchanged on 16 April at $80-100/t, and the 4x4 cut cathode premium was flat at $230-240/t in-warehouse Rotterdam. This is less than half of the $600-650/t in-warehouse Rotterdam premium in early October 2018, when premiums rose to a five-year high during a period of strong demand, with waiting times to cut nickel cathode extending to six-eight weeks.
Demand for nickel has plummeted since March as manufacturing activity has dropped sharply after non-essential businesses across Europe were ordered to shut to slow the spread of Covid-19.
Germany did not implement full lockdown measures requiring non-essential businesses to shut, but the slowdown in the automotive industry as car makers halt production has in turn slashed orders for many foundries.
Spot premiums for 4X4 cut cathode could rise if demand returns. "Demand is weak and patchy now, [but] if there is a boom time in foundries, you can expect supply to be tight," a trader said.
Some foundries can switch to using nickel briquette for production, which could limit premium increases for cut cathode.
Many traders were not surprised by the operator's decision to halt nickel cutting as the firm had indicated last year that it planned to withdraw the service. Many attributed the firm's decision to the high safety risk involved in operating the cutting machine, which has compelled many operators to halt cutting activities, despite consistent demand for cut cathode in Europe.
Although some trading firms have shearers that could cut nickel, the time taken to cut a full-load of nickel will be three-four times longer than using a cutting machine, a second trader said.
"Lots of small traders can do the cutting, but it is not very efficient," agreed a third trader.
Nickel cutting capacity in Rotterdam was already limited in 2018 as there were only three operators providing the service. Capacity fell when one operator halted cutting operations at end of 2018 and the exit of another major operator this month will further squeeze nickel cathode supply in Europe.
By Yoke Wong
