Nickel market in 2018: demand supporting another year of deficit
More than 60 government and industry representatives met in Lisbon on 23-24 April for the International Nickel Study Group Meeting. During the meeting, INSG reviewed the forecast for nickel production and use for 2017 and 2018. This article gives a brief overview of recent developments based on this data.
Article by Ricardo Ferreira, INSG Director of Market Research and Statistics, Meng Jianbin, INSG Director of Economics and Environment & Francisco Pinto, INSG Manager of Statistical Analysis
INSG revised the forecast for the nickel market deficit for 2018 to 117,300 tonnes during its meeting in April. Production in 2018 is expected to reach 2.227 Mt while usage is forecast at 2.344 Mt.
In 2017, world primary nickel production grew 4.4% and is expected to grow by a further 7.3% in 2018. In Asia, a combination of strong output in China and Indonesia in 2017 will be maintained in 2018. Chinese nickel pig iron (NPI) production was stronger than expected in 2017 and in Indonesia new NPI projects, mainly financed by Chinese companies, will continue to ramp up in 2018. In 2017, Asia produced more than 50% of world primary nickel.
In 2017, production fell in Africa and Europe, and in the Americas and Oceania was marginally higher. In 2018, output in all regions is expected to grow, except in the Americas where production in Brazil, Canada and Colombia is likely to decrease, though this will be partially compensated by increases in the Dominican Republic and Guatemala. Developments in nickel production have been affected by several factors. In Indonesia, NPI production increased 90,000 tonnes in 2017 and could add another 50,000 tonnes to the market in 2018.
PT Antam also increased production marginally in 2017 and announced further increases this year. Regarding nickel ore exports, the Indonesian government announced on 12 January 2017 a relaxation of the raw materials export ban imposed at the beginning of 2014. Subject to licenses issued by the government, producers will be allowed to export ore if they complete smelter projects within 5 years and dedicate at least 30% of capacity to processing low-grade ore (up to 1.7%). From an initial level of 5.2 Mt of nickel ore exports a year, approved quotas have reached 32 Mt so far, with requests for approval for an additional 4 Mt.
Hence companies allowed to export will get additional funding for the development of projects. Chinese NPI producers will have more feed available and INSG expects combined NPI production in China and in Indonesia to increase to around 720,000 tonnes in 2018. On 2 February 2017 the Filipino government announced the final results of an environmental audit of mines that had been taking place since mid-2016; however, in the meantime Ms. Regina Lopez was replaced by Mr. Roy Cimatu in October as Minister of Environment and Natural Resources. The newly appointed Minister said his department intended to conclude a second review of mining operations by the end of the last year, covering all operating mines, including those previously ordered to be closed or suspended.
This review has now been postponed to mid-2018. Elsewhere we have seen production adjustments being implemented. In Africa, nickel production increased in South Africa in 2016 and 2017 but is likely to decrease in 2018. In Madagascar, Ambatovy failed to ramp-up production in 2016 and 2017 but it is possible that it could rise in 2018. Both Botswana and Zimbabwe are currently not producing.
In the Americas, Brazilian producer Votorantim closed the Tocantins (Niquelândia) nickel mine and processing plant, but Falcondo (now owned by Americano Nickel) in the Dominican Republic resumed production in 2016 and ramped up output in 2017. This should continue to increase in 2018. Production at Loma de Níquel in Venezuela ceased in 2015. Guatemala restarted producing nickel in recent years and could expand production in 2018. Part of the ore mined is exported and the rest is smelted into ferronickel internally. In Canada, Vale is restructuring its nickel operations and the country’s total production will continue to fall.
In Europe, Russian Nornickel restructured operations in order to optimize them and to reduce environmental impacts. This included transferring part of the production to Harjavalta in Finland. Also in Russia, Ufaleynickel closed its ferronickel plant but there is speculation that Buruktahl could reopen. Finland’s Terrafame revived its Talvivaara operation and announced a strategy focused on producing battery materials. France’s Eramet stopped receiving feed from New Caledonia and will instead source it from Finland.
In FYRO Macedonia, FeNi Industries stopped production in Q3 2017 but could restart this year after securing financial support. In Oceania, Australian producer BHP is building a unit next to its refinery to produce nickel sulphate for the battery sector. In March 2016 the Yabulu refinery stopped operating. In New Caledonia, Vale is still re-evaluating the Goro operation. This includes the possibility of selling it according to recent announcements. Several large nickel producers have announced that they will increase their focus on producing materials for batteries for electric vehicles.
Figure 1. World primary nickel production, usage and market balance
World nickel usage was 2.192 Mt in 2017 (+7.8%) and is forecast to reach 2.344 Mt (+7.0%) in 2018. Usage in all regions will increase with Asia projected to grow by almost 9% in 2018. China currently accounts for more than 50% of world usage. The stainless steel sector remains the most important first-use market for nickel, however batteries have the potential to bring about a structural change in the nickel industry in the coming years. The International Stainless Steel Forum (ISSF) released production figures for the complete calendar year 2017 and estimated 5.8% growth for the world, with China rising by 4.7% and the USA registering an impressive 11% increase.
According to a preliminary forecast from ISSF, world stainless steel apparent consumption will grow around 5% in 2018. Tsingshan announced that it commenced producing stainless steel in Indonesia in July 2017 and are currently ramping up production. Nickel-rich 300 series stainless steel production remained at a high level, especially in China, which is beneficial for growth in primary nickel demand. Stainless steel scrap availability is expected to continue to improve due to higher prices. According to the recently completed report “The Use of Nickel in Batteries 2018” commissioned by the INSG, the use of nickel in batteries is a major focus regarding the development of new projects.
With the intensified emphasis put on vehicle hybridization and electrification by governments across the world, all major car makers have been responding to this trend by announcing timetables for their new hybrid or electric models and, in some cases, even a complete transition to a fully electrified fleet. We will summarise some of the key findings from this report. As a key material for batteries, the global output of nickel sulphate reached 69,000 tonnes (all quantities hereinafter are in nickel content) in 2017 and is expected to reach 101,000 tonnes by 2021.
The bullish expectation on producing high nickel-containing ternary material has propelled the development of production capacity of nickel sulphate. Producers from China and other countries are actively expanding new capacity or shifting current capacity to produce nickel sulphate. Nickel metal producers such as BHP Billion and Norilsk Nickel intend to focus on nickel sulphate as well. As mentioned, BHP Billiton is expected to produce nickel sulphate in Australia. Norilsk Nickel signed a MOU with BASF, intending to produce NCM precursors.
Chinese enterprises, such as Jinchuan Group, intend to reduce electrolytic nickel production and to expand the output of nickel sulphate. Other private companies, such as Tianjin Maolian and Yantai Kaishi, also plan to change their electrolytic nickel capacity to nickel sulphate.
Raw materials to produce nickel sulphate mainly include nickel matte, nickel intermediate and crude nickel sulphate from copper/PGM refineries. Nickel intermediate products include nickel intermediates from the hydrometallurgical process, mixed NiCo sulfide (with Ni + Co content 35%) and others. The total output of nickel intermediate reached 156,000 tonnes in 2017, and it is expected that output of nickel intermediate will reach 193,000 tonnes by 2021. Due to the limited availability of raw materials to produce nickel sulphate, some producers in China have started using nickel briquettes despite the fact that the cost is higher than using intermediate nickel.
The output of matte reached 78,000 tonnes in 2017, down 17% y-o-y mainly due to the shutdown of BCL’s smelter in Botswana as a result of low nickel prices. Nickel scrap used to produce salts in China reached 22,100 tonnes in 2017, while outside China it was only 4,400 tonnes. By 2021 scrap usage is expected to be 40,000 tonnes and 5,000 tonnes respectively. Most nickel salt producers in other countries, with the exception of Umicore, use primary nickel materials. Some Chinese producers use crude nickel sulphate from copper/PGM refineries to produce nickel sulphate – the figure is around 6,000 tonnes each year in China and 10,000 tonnes for the world.
In South Africa, Thakadu Battery Materials will invest in a nickel sulphate plant with an installed capacity of 31,000 tonnes of high-purity battery-grade nickel sulphate from the crude nickel sulphate stream of PGM producers. Nickel usage in batteries includes nickel foam, spherical nickel and hydrogen storage alloys in NiMH batteries, and ternary materials in Li-ion batteries.
Nickel foam and hydrogen storage alloys are mainly used in NiMH batteries; spherical nickel hydroxide is mainly used as cathode material for NiCd and NiMH batteries; ternary materials like NCM/ NCA are used in producing cathode for lithium-ion batteries. NCM/NCA can not only be used in EV batteries, but also in 3C products’ batteries in order to reduce costs. In 2017, global output of NCM/NCA was about 185,000 tonnes which used 62,000 tonnes of nickel – of which 54,000 tonnes was primary nickel and the rest sourced from nickel scrap. It is expected that in 2021, global NCM/NCA output will reach 470,000 tonnes and will use 230,000 tonnes of nickel – 186,000 tonnes from primary nickel and 44,000 tonnes from nickel scrap.
Global primary nickel usage in NCM/NCA will see a 36.2% of CAGR for the 2017-2021period. Propelled by the electric vehicle industry, it is anticipated that nickel usage in batteries will account for 8% of total nickel usage by the year 2021 compared to 3.6% last year. The global battery industry used 80,900 tonnes nickel in 2017, including 4,200 tonnes from scrap, and the volume is expected to reach 240,500 tonnes, including 26,300 tonnes scrap by 2021. The CAGR from 2017-2021 will be 31.3%.
Figure 2. World stainless steel melting production
Stocks and prices
Stocks in exchange warehouses at the end of 2017 were 410,800 tonnes, down 11.8% year-on-year. Since the start of 2018, they have fallen a further 15.6%, or 63,900 tonnes, reaching 346,900 tonnes at the end of April. Though stocks remain high, they are at their lowest level since August 2014 (when the LME was the only clearing house making nickel stocks available). Steady destocking became noticeable at an increased pace of over 20,000 tonnes per month from February to April 2018. This compared to an average monthly draw of approximately 9,000 tonnes in the last quarter of 2017. The LME holds about 88% of available stocks, while the SHFE holds 12%.
This distribution is very similar to what it was in the end of 2017, suggesting similar stock drawdowns in relative terms over this period, though the SHFE saw a large increase in stocks in January (12,500 tonnes) that was then compensated by larger than usual withdrawals over the following months.
The LME nickel price (cash settlement) at the end of 2017 was USD 12,260/t representing a 22.5% increase from the previous year. Since the start of 2018, the price has further increased by 11.9%, and was USD 13,725/t at the end of April. In the meantime, a peak of USD 15,710/t was seen in mid-April, coinciding with unconfirmed rumors about the US sanctioning certain nickel producers. The last weeks of April have seen nickel prices cooling down, as those rumors remained unconfirmed. Although volatility has been present, monthly average prices show that increases have been more frequent and more intense than decreases over the last 6 months.