Viewpoint: China to import more nickel sulphate in 2021

New nickel sulphate projects outside China will attract more interest from Chinese consumers in 2021 owing to the rapid development of its new energy vehicle (NEV) industry and tightening domestic supply, with the country's imports poised to keep ramping up.

In early December, Chinese mining firm Ningbo Lygend resumed construction of its nickel-cobalt production project on Indonesia's Obi island and remains on track for the first-phase launch in the first quarter of 2021. The project has capacity to produce 160,000t/yr of nickel sulphate and 20,000 t/yr of cobalt sulphate.

Indonesia has other projects targeting the battery industry, such as the 50,000 t/yr power battery project from China's Tsingshan, Green Eco-Manufacture (Gem) Brunp Recycling, along with a 45,000 t/yr nickel matte mining project from Huayou.

UK-Australian resources group BHP is constructing a 100,000 t/yr nickel sulphate plant at its Kwinana refinery. China imported 3,708t of nickel sulphate in January-October, down by 3pc from the same period last year, customs data show.

New rules to control domestic feedstock supply

China's revised solid wastes law of September 2019 and stricter battery recycling standards introduced in January 2020 are likely to tighten domestic supply, market participants said.

China's Law on the Prevention and Control of Environmental Pollution by Solid Wastes clarifies the legal requirements for the identification of attributes of imported goods suspected of solid wastes.

Furthermore, China's ministry of industry and information technology introduced strict regulations for battery recycling standards, stipulating that the nickel recovery rate should not be below 98pc.

This could increase domestic production costs or even reduce output in the long term, as China's sulphate production partly relies on imported solid wastes that contain nickel. The country's recycling industry will mainly rely on used power batteries from the domestic market.

As a result, Chinese nickel scrap import was already down at 45t in October, falling by 60pc from 113t in September and by 51pc on the year, customs data show.

Domestic demand from NEV sector

A growing trend of reducing cobalt content in batteries because of higher metal prices and production costs has intensified pressure on the automotive battery industry.

The two main solutions are to use lithium iron phosphate (LFP) batteries as a replacement, or to increase nickel content in batteries, which can boost the development of nickel-cobalt-manganese (NCM) 8-1-1 up from NCM 5-2-3.

In September, the US' Tesla unveiled its "non-cobalt" landscape, which highlighted plans to use more nickel in its batteries for passenger vehicles and energy storage facilities. This shift is expected to increase nickel usage in the battery sector in the long term and further support sulphate prices.

China's newly installed NCM/nickel-cobalt-aluminium (NCA) batteries accounted for 57.6pc of the total volume in October, down from 71.3pc a year earlier, according to China's automotive manufacturers association (CAAM).

Although the market share of NCM/NCA decreased, the whole market is expanding and volumes are still growing. As a result, demand for nickel materials from the Chinese domestic market will continue to increase, market participants said.

CAAM data showed that the country's newly installed volume of NCM/NCA batteries was 3.4GWh in October, up by 17pc year on year.

Argus-assessed 22pc grade nickel sulphate prices rose to the year-to-date high of Yn29,500-30,500/t ex-works China on 15 December, after reaching Yn27,500-32,500/t in late October, which is the highest since a 4 December 2019 assessment of Yn27,000-33,000/t.

Demand outside China through toll processing trade

China's allowance of toll processing trade of some nickel materials is expected to boost the export of nickel and battery ternary precursors, and raise demand for nickel sulphate.

On 1 December, the country officially removed nickel-related products from a list of commodities that are prohibited from toll processing trade, including nickel ores and concentrates, nickel sulphate and nickel chloride.

China exported 72,876t of NCM ternary precursors in January-October this year, up by 36.9pc from a year ago, with export volume of NCA ternary precursors down by 5.7pc to 5,922t during the period, customs data show.

By Shanghai staff