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Nickel market in flux as LME price rallies

  • : Metals
  • 24/03/21

The benchmark nickel price on the London Metal Exchange (LME) has rallied over the past month after briefly falling below $16,000/t, as trading firms increased their buying to cover vast short positions. Options buying activity and commodity trading advisor bids have lifted the contract above $18,000/t in recent days.

Higher Chinese nickel sulphate prices, delays to the issue of ore production licences in Indonesia and cuts to class 2 nickel supply also supported the price rise.

But the physical market outlook is mixed, despite the recent rise in prices. A sizable surplus of class 1 nickel and weak downstream consumption are applying pressure on the downside, but possible further supply cuts in Indonesia, Australia and New Caledonia are shoring up prices. A price gap between LME and Shanghai Futures Exchange (SHFE) contracts is providing arbitrage opportunities and keeping LME values in check.

Covering short positions

The LME official three-month nickel price rose by 13.5pc from $15,987.50/t on 9 February to $18,445/t on 13 March. Sustained buying to cover short positions was a major driver of the increase. Nickel short positions on the LME fell from 61,000 lots on 9 February to 22,000 lots on 11 March, according to financial broker Marex strategist Al Munro. The cyclical nature of nickel trade has also prompted options positioning around the current prices as trading companies guard against volatility.

Nickel prices hit a trough in February, a trading firm said. "The class 2 market is tighter than expected now, so we should not go back to the $16,000/t level."

Class 1 oversupplied, class 2 tight

Fundamentals for physical nickel indicate there is a surplus for class 1 nickel, driven by increasing LME-deliverable capacity in China and declining use of class 1 products in the battery market. On-warrant class 1 stocks in LME warehouses touched 70,000t on 4 March, for the first time since November 2021.

In contrast, availability of class 2 nickel has tightened, with nearly 200,000t of capacity in the form of ferro-nickel and nickel pig iron (NPI) cut from the supply mix in recent months, according to Australian bank Macquarie.

The supply squeeze is most pronounced in ferro-nickel. The low-grade product held a narrow price gap with NPI last year, but is now being offered at just $1,000/t below class 1 LME prices, according to Macquarie. Surplus Asian NPI stocks are flowing into Europe to replace scarce ferro-nickel supplies, Macquarie said.

Unreliable and under-reported data from China and Indonesia have made it difficult for market participants to assess nickel balances against price movements, particularly in class 2 products. Analysts in January predicted an overall nickel surplus of more than 100,000t for 2024, but have now cut their overhang forecasts by more than half, with a possible total rebalancing in 2025.

Battery demand jumps, stainless stable

Nickel demand growth was almost exclusively delivered by Chinese stainless steel production last year, with Macquarie pegging China's nickel use in the stainless steel sector to have risen by 20pc year on year. Chinese demand growth is expected to stabilise in 2024, as indicated by a fall in stainless futures prices on the SHFE. Macquarie expects global stainless steel production to rise by 5.5pc this year to 62.2mn t, a rate comparable with 2023.

The main source of nickel demand this year will come from restocking among battery cathode producers, reflected in rising Chinese nickel sulphate prices. The Argus assessment for nickel sulphate min 22pc ex-works China has increased by 17.5pc from the start of this year to an average of 29,650 yuan/t ($4,100/t) on 14 March. Nickel demand for electric vehicle (EV) production will rise by a third on the year to 450,000t in 2024, Argus Consulting data show.

Indonesia ore dynamics

Bureaucratic delays in granting nickel ore production licences in Indonesian have lifted ore prices, limiting the supply of downstream nickel intermediate products mixed hydroxide precipitate and matte. Indonesia's government is likely to implement stricter controls this year to guard against environmental, social and governance concerns, alleged corruption and illegal exports. This could support ore prices and drive NPI and LME nickel prices higher. But Indonesia's fundamental policy of flooding the global market with nickel units will continue.

Push-pull effect

Prices are expected to recouple with fundamentals once the current short covering programme eases. The expected nickel surplus should suppress prices below $20,000/t, market participants said. And further cuts to ex-Indonesia supply could drive the market towards $19,000/t, with trading firms focused on Australian mining group BHP's review of its Nickel West operations.

"We are in a place where everything could change in a matter of 24 hours," a trading firm said. "If Nickel West announce cuts, you will see the market reacting immediately."

LME Nickel 3M Official $/t

Nickel Sulphate min 22pc ex-works China CNY/mt

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24/07/18

India’s MRAI urges zero import duty on Al scrap

India’s MRAI urges zero import duty on Al scrap

Mumbai, 18 July (Argus) — The Material Recycling Association of India (MRAI) has urged the government to remove import duties on aluminium scrap in its budget to be presented on 23 July. "Among the key challenges faced by the Indian aluminium recycling industry is paying [a] 2.5pc import duty on aluminium scrap," MRAI said in a letter to India's finance minister Nirmala Sitharaman. "It is a key raw material for aluminium recycling and the government should make it zero until the quality material is available in sufficient quantity in the domestic market." The government has a duty to create a level playing field between primary and secondary aluminium producers, said MRAI president Sanjay Mehta. "If customs duties are applicable on import of scrap, then commensurate export duties on the basis of total cost to country on primary products should also be levied." India does not have sufficient supplies of good quality metal scrap to support its recycling industry and relies heavily on imports. The current import duty system, coupled with the lack of aluminium scrap in India, reduce Indian producers' competitiveness in global markets because most other countries have no import duty on metal scrap. This could decelerate the country's effort to achieve its sustainability goals, added MRAI senior vice-president Dhawal Shah and the managing director of CMR Green Technologies Mohan Agarwal. India imported 1.83mn t of aluminium scrap in 2023 with more than a quarter coming from the US. Europe, the Middle East and north Africa are its other key suppliers. By Deepika Singh Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

China's Sunwoda plans $275mn battery plant in Vietnam


24/07/18
24/07/18

China's Sunwoda plans $275mn battery plant in Vietnam

Singapore, 18 July (Argus) — Major Chinese lithium-ion battery manufacturer Sunwoda plans to build a 2bn yuan ($275mn) battery plant in northern Vietnam's Bac Giang province. The site is expected to produce consumer battery cells, system-in-package and batteries, said Sunwoda. Capacity was undisclosed but the site is expected to generate around $1bn/yr of revenue, according to an official portal by Bac Giang Provincial People's committee. Northern Vietnam houses sites of multiple major technology and semiconductor firms including Apple, Foxconn and Samsung, but unannounced or short-notice power cuts have affected production bases in the region. Power outages in Northern Vietnam during May-June 2023 disrupted production and were estimated to have shaved 0.3pc off the country's GDP, according to a 2023 report by World Bank. But the province has "overcome the power supply difficulties", said the current chairman of the Bac Giang Provincial People's committee chair Le Anh Duong. The power supply lines and stations for manufacturing plants in the province have been strengthened, Duong said, adding that the province is looking at upgrading its electricity transmission system and prioritising the allocation of electricity output to key manufacturing companies. Sunwoda will be on its power supply priority list if Sunwoda goes ahead with the investment, said Duong. Rising market barrier pressure and overseas demand prompted major Chinese battery firms to expand overseas in an attempt to deal with geopolitical curbs. Disclosed overseas investment from China's lithium-ion battery sector totalled Yn565bn as of June, according to Chinese research institution EV Tank earlier this month. By Joseph Ho Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

BHP posts higher nickel output after disruptions


24/07/17
24/07/17

BHP posts higher nickel output after disruptions

Singapore, 17 July (Argus) — Australian resources group BHP lifted its nickel production during April-June as it recovered from planned maintenance and wet weather disruptions in the previous quarter. BHP's refined nickel production for April-June rose by 22pc against the previous quarter and by 4.5pc from a year earlier to 23,000t. The increased output was a result of a low base in the previous quarter with planned maintenance at the Kwinana refinery in Western Australia (WA) and poor weather conditions in March, the firm said. Total refined nickel output for the 2023-24 fiscal ending 30 June was 81,600t, up by 2pc from the same period last year. BHP on 11 July announced that it will temporarily suspend operations at its WA nickel businesses from October, on the back of nickel oversupply and an anticipated nickel price downtrend. BHP has also decided to halt operations at its Kambalda concentrator earlier in February, placing it into a care and maintenance phase from June. Mining and processing operations at the Kwinana refinery, Kalgoorlie smelter and Mount Keith and Leinster mines will be suspended, while development of the West Musgrave project will be put on hold. BHP will implement a care and maintenance programme to ensure the safety and integrity of its mines and infrastructure. It will invest around $300mn/yr following the transition period to support a potential restart of the facility. The transition period will start from July, with operations to be halted in October and completely stopped by December. BHP intends to review the closure by February 2027. BHP expects to record negative earnings before interest, taxes, depreciation and amortisation of around $300mn for 2023-24 and sustain a further $300mn pre-tax non-cash impairment charge following the temporary suspension decision. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Rio Tinto to boost 2H Australian iron ore shipments


24/07/16
24/07/16

Rio Tinto to boost 2H Australian iron ore shipments

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Cliffs to buy Canadian steelmaker Stelco


24/07/15
24/07/15

Cliffs to buy Canadian steelmaker Stelco

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