Nickel prices are, finally, on the move.
Owners of shares in nickel mines shouldn’t start popping the champagne corks just yet. It’s going to be a slow burn rise, but the landscape appears to be shifting and it is because of, as usual, China. First and foremost, there is a trend among stainless producers this year, particularly in China, to produce more 300 series nickel-bearing grades than last year.
Real Demand is Up
Just as mills and consumers shifted wholesale from 300 to 400 series grades when nickel prices went through the roof in 2010-11, a prolonged period of falling prices has encouraged consumers and designers to switch back to higher-quality grades.
Macquarie Bank is quoted by Reuters saying global nickel demand will grow by 4.4% this year, largely on the back of a predicted 4% rise in Chinese 300 series stainless production. Likewise, the INSG estimates the global market will fall into a small 600-ton deficit in Q1 of this year, although it must be said the market remains well supplied by huge global stocks.
Demand for refined nickel and ferro-nickel has been rising in China, in part due to the above but also due to the falling availability of nickel ore to feed the country’s nickel-pig iron market. Indonesia has not been coveted as a supplier since the export ban in early 2014 and the stand-in supplier, the Philippines, appears to be struggling to even maintain last year’s delivery performance.
Of course, Tsingshan’s NPI plant in Indonesia is a part of the mix, too. It has supplanted some Chinese production by refining locally in Indonesia and shipping NPI back to the mainland. Some 67% of China’s imports of ferro-nickel-type material or 196,400 metric tons. Not surprisingly, when you look at the number Reuters reports, it’s at $1,041 per mt for Tsingshan’s NPI compared to $2,000 for ferro-nickel from New Caledonia, Brazil and Colombia.
What’s Creating Demand?
Part of the buzz surrounding nickel at the moment is a long-awaited fall in London Metal Exchange stocks and huge increase in Chinese imports of refined metal - mostly Russian Norilsk Nickel material following its acceptance as a good deliverable brand on the Shanghai Futures Exchange.
SHFE stocks have exploded from 3,100 mt this time last year to 91,725 mt, according to Reuters. It should be said this is as much a shift in inventory from west to east than it is an expression of a surge in true demand, but Chinese enthusiasm for refined nickel is being taken as a supportive sign for domestic nickel demand.
Refined imports hit a new all-time high of 49,012 mt in April bringing the total for the first four months to 157,600 mt, a 115,000 mt increase over the same period last year, while ferro-nickel surged to 294,700 mt, but before we get too excited this is more a case of refined or semi-refined products making up for unrefined concentrate, whose levels of production, as we previously mentioned, have fallen.
Nevertheless, when all is said and done demand is surprising on the upside and supply finally seems to be sufficiently constrained to balance the market. What impact that has on prices this year and next remains to be seen, but it is a more supportive picture than nickel has enjoyed for some time.