Ni prices unlikely to rebound in near term

  • : Battery materials, Metals
  • 24/01/16

Hopes of a recovery in nickel prices at the start of 2024 have been dashed, as the markets continue to focus on an intensifying supply glut in the Class 1, Class 2 and nickel chemicals spaces. And even as market participants indicate that prices are now close to bottoming out with fundamentals accounted for, values are set for a prolonged spell at current levels.

Benchmark nickel on the London Metal Exchange (LME) has shed nearly 4pc this year to $16,140/t. The LME's annual index rebalance window, disruption to Chinese giant Tsingshan's Indonesian nickel supply, cuts to Australian output and delays to the launch of new capacity in Indonesia have all failed to lift prices, which continue to hover close to three-year lows. LME nickel recorded the biggest short position since 2003 in November, both in terms of percentage of open interest and lots, and a covering programme since then has stagnated with the short rebuilding at the Shanghai Futures Exchange, according to UK-based financial broker Marex.

Surpluses were already prominent on the Class 2 side, but Chinese producers' new-found capability to convert battery ingredient nickel sulphate into Class 1 metal has driven the new market oversupply. On-warrant nickel stocks in LME warehouses have been rising steadily and totalled 65,412t on 16 January, the highest since 24 November 2022, on the installed Chinese Class 1 capacity. As the market adjusts to the likelihood that the global transition to electric vehicles (EVs) will be slower than expected, China has redirected surplus nickel sulphate to domestic Class 1 production, creating more nickel units while reducing its own reliance on imports from traditional sources such as Russia. China imported 114,172t of nickel sulphate in January-November, more than double on the year, customs data show, with supplies from top producer Indonesia constituting 47pc of total imports. But China imported 83,114t of nickel metal over the same period, down by 41pc on the year.

On the Class 2 side, processing capability continues to support nickel pig iron (NPI) production in Indonesia despite a drop in prices, with participants adopting a strategy of producing NPI before deciding on whether or not to convert it into matte, based on market conditions. The Argus assessment for nickel pig iron min 10pc ex-works China has declined by 18.5pc to $13.037/kg since the fourth quarter of 2023.

"We expect the supply momentum to carry on into 2024, with rising output from Indonesia flooding the market," the head of base metals research at UK trading group Sucden Financial, Daria Efanova, said. "Indonesian mining output is set to grow to above 2.3mn t in 2024, with the trend continuing until 2026 when supply for the coming decade will peak."

Much of the bullishness around nickel prices during 2021-22 was based on a projected surge in global EV consumption. But while the market continues to be the single biggest driver of nickel demand growth, nickel use has been hit by reduced consumer spending in China, Europe and the US because of economic headwinds, policy changes in the west and the rise of more cost-effective EVs with no-nickel lithium iron phosphate batteries. Argus forecasts that global EV sales will rise by 37pc to 14.96mn in 2024, slower than the 64pc growth registered in 2021-22, as major automakers scale back production plans. The Argus assessment for nickel sulphate min 22pc cif China has fallen by a third over the past year to $3,150/t on 15 January.

"Automakers are unlikely to stockpile nickel as they have done in the past," Efanova said. "We expect that the EV trend is more likely to support prices rather than urge them higher this year."

With producers struggling for profits on the current trend of nickel prices, market participants are mostly of the view that there is neither a downside or upside to prices, given that the slower demand growth is weighing on prices just as the supply side moves to curtail output this year. Class 1 supply will stabilise this year with surplus Chinese capacity kept idle, Russia's Norilsk Nickel pivoting in part towards other nickel products, and Brazil's Vale still in asset integrity mode. And in the Class 2 market, construction of new capacities for nickel sulphate and upstream feedstock material mixed hydroxide precipitate will see delays and cancellations this year.

"There are possibilities of slower supply growth as prices are now close to the cost of production," Efanova said. "But while this might exacerbate the deficit by the end of the decade, this is unlikely to change the course of nickel prices in the near term."

With LME prices probably set for an extended spell in the early to mid-$16,000s/t, a key challenge for the market this year will be to balance near-term headwinds against the long-term picture of rising nickel demand so that the price encourages ramp-ups upstream and expansion in the value chain downstream.


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24/05/17

Trade curbs spur Chinese battery firms to look overseas

Trade curbs spur Chinese battery firms to look overseas

Beijing, 17 May (Argus) — An increasing number of Chinese battery firms have accelerated their expansions outside China, to meet buoyant overseas demand and to tackle escalating geopolitical curbs. These curbs include the US' newly announced tariff hikes on China's electric vehicles (EVs) and batteries from 2024 or 2026, and the EU's potential punitive duties on battery EVs originating from China. The US' Inflation Reduction Act (IRA) and the EU's Critical Raw Material Act have also prompted many Chinese battery material producers to step up their overseas expansions. China's battery material manufacturer Hunan Zhongke Electric has unveiled a plan to invest no more than 5bn yuan ($692mn) to build a production plant for battery anode material in Morocco, in which some other Chinese firms have also invested in similar projects. The plant has a designed capacity of 100,000 t/yr and will be developed in two phases with 50,000 t/yr each. The firm aims to complete plant construction for each phase in 24 months. Zhongke is a major battery anode material producer in China with 210,000 t/yr of capacity as of the end of 2023. Its output of anode materials rose to 143,513t in 2023, up by 14pc from 125,460t a year earlier, driven by the country's rising EV sales. It aims to expand overseas sales in the coming years. Major Chinese copper producer Zhejiang Hailiang also outlined a plan to build a 25,000 t/yr production plant for copper foil used in lithium-ion batteries in Morocco. Construction will take 36 months. "The layout of the Morocco project can help us penetrate into the European and US markets as soon as possible as exports from Morocco are duty free to these markets," Hailiang said. "This will help us avoid any international trade barrier." Morocco is one of the main destinations for Chinese companies to invest in and build overseas battery component plants given its abundant resources for phosphate, a main chemical compound in a lithium iron phosphate battery, and its free trade agreement (FTA) with the US. It is also a major cobalt metal producing country outside China, with cobalt being a critical mineral used in the manufacturing of lithium-ion batteries. Major Chinese battery material producer EVE Energy is on track to develop a production project for energy storage batteries in Malaysia. It will establish a subsidiary EVE Energy Malaysia Energy Storage to develop this project to meet Malaysia's energy storage battery demand, although it has not disclosed the capacity, construction schedules and launch dates. The plant is the second phase of EVE's new energy products development in Malaysia. It in August 2023 started building a plant for cylindrical batteries mainly used in electric two-wheelers and electric tools in the southeast Asian country. The firm said the US' new tariff hikes will not affect its business because it had planned the Malaysia projects for consumer batteries and energy storage in advance, and these projects will support shipments to US consumers by 2026. New US tariff hikes US president Joe Biden's administration announced on 14 May that the tariff on lithium-ion EV batteries will immediately increase to 25pc, while the tariff on all other lithium-ion batteries is set to increase to 25pc in 2026, both from the current rate of 7.5pc. This is likely to trigger more Chinese battery companies to increase their overseas investments to avoid the tax, according to industry participants. The US' tariff hikes have drawn strong criticism from China. "Politicising and instrumenting economic and trade issues is typical political manipulation," said the country's ministry of commerce. "The Section 301 tariff hikes goes against President Biden's promise of 'not seeking to contain China's development' or 'not seeking to break the chain of decoupling from China'. The US should immediately correct its wrongful actions and cancel the tariffs. China will take 'resolute" measures to safeguard its own rights and interests'." Chinese battery firms' investments in Morocco Company Products Capacity Launch dates CNGR CAM precursors, LFP, black mass 120,000 t/yr, 60,000 t/yr, 30,000 t/yr 4Q, 2024 BTR CAM 50,000 t/yr N/A Hunan Zhongke Anode material 100,000 t/yr in 24 months Huayou Cobalt/LG LFP 50,000 t/yr in 2026 Huayou Cobalt/LG Lithium salts 52,000 t/yr N/A Sichuan Yahua/LG Lithium hydroxide N/A N/A Hailiang Li-ion battery copper foil 25,000 t/yr in 36 months Source: Company releases Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

US inflation slows broadly in April


24/05/15
24/05/15

US inflation slows broadly in April

Houston, 15 May (Argus) — US consumer price gains eased in April, with core inflation posting the smallest gain in three years, signs the economy is slowing in the face of high borrowing costs. The consumer price index (CPI) rose by an annual 3.4pc in April, easing from 3.5pc over the prior 12-month period, the Labor Department reported on Wednesday. Core CPI, which strips out volatile food and energy, rose by 3.6pc, slowing from 3.8pc the prior month. The easing inflation comes as the Federal Reserve has pushed back the expected start of interest rate cuts after holding its target rate at a 23-year high since July 2023 as the US economy has continued to grow and generate jobs at greater than expected rates. Job growth however slowed to 175,000 in April, the lowest since October 2023, and job openings and wage gains have also slowed while a measure of manufacturing has contracted. The CME FedWatch tool boosted the probability of Fed rate cuts in September to about 72pc today from about 65pc on Tuesday. The energy index rose by 2.6pc over the 12 months ended in April, accelerating from 2.1pc. The gasoline index slowed to an annual 1.2pc in April from 1.3pc The food index rose by an annual 2.2pc, matching the prior month. Shelter slowed to 5.5pc from 5.7pc. Services less energy services slowed to 5.3pc from 5.4pc. Transportation services accelerated to an annual 11.2pc, led by insurance costs, from 10.7pc in the 12 months through March. On a monthly basis, CPI inflation slowed to 0.3pc in April from 0.4pc the prior two months. Core inflation slowed to 0.3pc from 0.4pc the prior three months. Energy held flat at a monthly 1.1pc. Services less energy services slowed to a monthly 0.4pc gain from 0.5pc. By Bob Willis Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Liberty looks to sell or recapitalise EU rolling lines


24/05/15
24/05/15

Liberty looks to sell or recapitalise EU rolling lines

London, 15 May (Argus) — Beleaguered steelmaker Liberty Steel is looking to recapitalise or divest its main European rolling lines, the company said today. The lines are Liege in Belgium, Dudelange in Luxembourg and Piombino in Italy, and have a capacity of over 2.5mn t, the company said. Liege and Dudelange galvanise hot-rolled coil (HRC) and produce tinplate and blackplate, Magona produces prepaint and hot-dipped galvanised (HDG) products. "The primary objective is to review options for strategic partnerships through long-term HRC feedstock supply contracts, but will also consider and [sic] co-investment and divestment options," Liberty said. Negotiations over at least one of the assets have been ongoing for a number of months, but have potentially stalled at the contract signing stage, sources suggested this week. The company refused to comment on "speculation". As with Liberty's other EU and UK assets, the lines have not been producing anywhere near full capacity, if at all, for a number of years. They have not been supplied with feedstock from the company's own mills. Galati in Romania is operating, but nowhere near capacity, while Ostrava is rolling limited quantities of imported slab with the aid of third-party financing. As far back as June 2021, Belgium's Walloon government discussed loaning Liberty Steel an undisclosed fee to continue operating Liege-Dudelange, subject to the organisation of a sales procedure being started. Walloon's investment firm Sogepa said the loan would be subject to "strict conditions", including the organisation of a sale, but the loan was not finalised in the end. That same month, Liberty merged the downstream assets of Dudelange, Liege and Piombino into its Galati organisation. At the time the company said this would see Galati become the primary supplier of HRC to the rolling lines. The difficult market environment in Europe is compounding the difficulties faced by Liberty. Last week it mothballed its merchant bar mill in Scunthorpe, UK , as first reported by Argus . In reality, the mill has not produced anything for years. At Liberty's Speciality Steel business in south Yorkshire, UK, around 7,000t has been produced this year, out of nameplate capacity of 1.2mn t/yr. By Colin Richardson Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

VW idles Brazil auto plants as floods hit parts supply


24/05/14
24/05/14

VW idles Brazil auto plants as floods hit parts supply

Sao Paulo, 14 May (Argus) — Persistent heavy rains in Brazil's Rio Grande do Sul led Volkswagen to announce collective vacation for workers in three of its local plants as the automaker struggles with a lack of parts made in the flood-hit state. The Anchieta, Taubate and Sao Carlos facilities, in southeastern Sao Paulo state, will have collective vacation starting 20 May as floods forced auto part suppliers to stop production. "Due to the heavy rains affecting the state and people of Rio Grande do Sul, some Volkswagen do Brasil parts suppliers, with factories installed in the state, are unable to produce at this time," the company said on Tuesday. Volkswagen declined to comment on which auto parts suppliers were affected by the floods. Volkswagen's Sao Jose dos Pinhais facility, in Rio Grande do Sul, will remain operating, the company said. Heavy rains that began flooding Rio Grande do Sul in late April persisted over the weekend , continuing to wreak havoc in the state. Rains reached an accumulated 123mm (4.8in) on 10-12 May in the state capital Porto Alegre, according to Brazil's national meteorological institute Inmet. Some areas experienced around 80mm of rain on 12 May alone, according to the US National Oceanic and Atmospheric Administration. Showers lessened but continued on 13 May, reaching 35mm in some parts of the state. The extreme weather has left 148 dead and 124 missing, according to the civil defense. Over 538,000 people are displaced. By Carolina Pulice Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Anglo American to exit from coal, Ni, platinum: Update


24/05/14
24/05/14

Anglo American to exit from coal, Ni, platinum: Update

Adds details of Anglo American's latest plan to demerge or sell its assets Singapore, 14 May (Argus) — UK-South African mining firm Anglo American has announced plans to exit its coal, platinum, nickel and diamond businesses, shortly after rejecting Australian resources firm BHP's latest takeover bid. Anglo American wants to sell its coking coal business in Australia, which includes the 6.5mn t/yr Moranbah and 5mn t/yr Grosvenor mines in Queensland. The firm also plans to demerge Anglo American Platinum, as well as sell or demerge its De Beers diamond business, it said on 14 May. Anglo American will also slow investment in its Woodsmith polyhalite fertilizer project in the UK, where it was previously targeting first commercial output in 2027 . It is also exploring options for care and maintenance as well as divestment of its nickel assets in Brazil. The move to "accelerate the delivery of consistently stronger shareholder returns" with the latest plan comes on the back of a takeover bid by BHP. Anglo American turned down a revised £34bn ($42.7bn) takeover proposal from BHP on 13 May because it "continues to significantly undervalue Anglo American and its future prospects". It earlier rejected BHP's £31bn all-share offer for the same reason. "The latest proposal from BHP again fails to recognise the value inherent in Anglo American," Anglo American chairman Stuart Chambers said on 13 May. Anglo American shareholders are well positioned to benefit from increasing demand from "future-enabling products", Chambers added. Copper was the second-highest contributor to Anglo American's earnings last year, accounting for 32pc of its earnings before interest, taxes, depreciation and amortisation, after iron ore. BHP's latest offer represents a total value of around £27.53 per Anglo American ordinary share, including £4.86 in Anglo Platinum shares and £3.40 in Kumba shares, BHP said on 13 May. The takeover proposal came with a requirement for Anglo American to complete two separate demergers of its entire shareholdings in Anglo American Platinum and Kumba Iron Ore — its assets in South Africa — to Anglo American shareholders. "This leaves Anglo American, its shareholders and stakeholders disproportionately at risk from the substantial uncertainty and execution risk created by the proposed inter-conditional execution of two demergers and a takeover," Anglo American said. By Reena Nathan Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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