Nickel December 2016
AME retains its short-term price forecast...

AME retains its short-term price forecast of US$9,623/t (US$4.36/lb) for 2016, with prices expected to rise to an average of US$10,900/t (US$4.94/lb) in the December Quarter, an increase of 6% on the September Quarter. During November, the LME nickel price averaged US$11,125 (US$5.04/lb), an 8.4% increase month on month, with prices jumping from around US$10,400/t in the first week of November to over US$11,000/t, reaching a peak of US$11,582/t (US$5.25/lb) towards the end of the month.

The finished nickel deficit of around 10ktpm seen from March has moderated late in the September Quarter to a near balanced market, but with just under 30% of current finished nickel producers operating at a loss, AME expects prices in 2017 to rise to an average of US$13,400/t (US$6.08/lb). Combined LME and SHFE deliverable exchange stocks remained flat over November at just below 472kt, with a 3kt rise on the LME offset by a similar fall on the SHFE. This is the second straight month of stock rises on the LME, after stocks declined from a peak of 448kt at the end of January 2016.

Chinese port stocks of nickel in DSO declined over the month from 15.7Mt to 15.2Mt, with stockpiles of low-grade ore remaining stable while stockpiles of medium- to high-grade ore declined from 10.5Mt to 10Mt. AME estimates that Chinese port stocks currently contain 138kt, down 3.5% over the month. The decline comes as deliveries of imported ore drops away as the DSO shippers in the Philippines main producing region in northeastern Mindanao enter the wet season, with imports falling from a peak of 4.9Mt in September to 3.3Mt in October, with contained nickel in imports estimated to have fallen to 28kt from 41kt over the period. Peaking imports in September were later than in 2015, when imports peaked around 4.9Mt in July, due to a later than normal end to the wet season this year.

Norilsk’s strategic restructure has reduced the companies output in 2016, and provided an opportunity to improve environmental performance. AME expects Norilsk’s total finished nickel output in 2016 to reduce by 16.5% to 222kt.

  • Nornickel (previously Norilsk Nickel) has revised down its guidance for 2016 nickel production sourced from its own Russian operations from previous guidance of 206–212kt to 195–200kt due to ongoing industrial testing of the upgraded Talnakh concentrator. The upgrade forms part of Nornickel’s strategic upgrade, with the decommissioning of the Nickel Plant in August seeing finished nickel production ceasing at Polar, with finished nickel refining capacity processing nickel sourced from Polar shifting to Kola and Harjavalta refineries. As a result of this shift, finished nickel output at Kola was 34.6kt in the September Quarter, up 29% on the June Quarter, while finished nickel production at Harjavalta increased 40% to 14.7kt, resulting from a seven times increase in feed from Nornickel’s Russian operations to 5.3kt.
  • Improvements in environmental performance have been a key activity for Nornickel in parallel with its strategic restructure. During the month, Nornickel announced it had signed a contract with SNC-Lavalin to design and install a sulphur dioxide capture plant at Polar’s Nadezhda smelter. Together with the closure of Polar’s Nickel Plant, which removed around 370kt of sulphur dioxide emissions, this will reduce emissions at Polar operations by 75% by 2020. Similarly, Kola aims to reduce its sulphur dioxide emissions by 45% over the next two years from 80kt to 45kt.

Production elsewhere has also been constrained by issues of grade, plant maintenance and accidents.

  • Production at Vale’s Long Harbour refinery, currently in ramp-up, was flat on the June Quarter at 3.8kt due to maintenance in late September.
  • Production at Glencore’s Murrin Murrin operation was down 9% on the June Quarter to 9.9kt due to lower grades and plant maintenance.
  • An explosion at the SLN Smelter in New Caledonia temporarily halted operations of three furnaces for 24 hours following a series of explosions. Normal Furnace operations were quickly re-established, with very limited production loss.
  • Production was reduced at Sherritt’s Moa Bay joint venture in Cuba following a bridge collapse that killed four workers who were repairing the structure, which was damaged by Hurricane Matthew in October. The incident is likely to reduce output from the operation by a little over 1kt around 33kt in 2016.
  • Elsewhere, strong production was reported, and climbing nickel prices are encouraging marginal operations to re-enter production. The Jiangsu Baotong NPI smelter is being recommissioned, after being idled in early 2015 as nickel process dropped below the cost of production. The smelter, with a capacity of 41ktpa, produced over 18kt in 2015.
  • Production from Vale’s VNC HPAL operation in New Caledonia was up 7% quarter on quarter to 9kt in the September Quarter, and up 11% year on year, despite scheduled maintenance in the quarter, which limited output. Vale guidance nickel production from VNC in 2017 is 43.5kt, up around 21% on this year.