Nickel
Speeding Up
August 2019
After two stable months, nickel prices experienced a significant lift in July to US$13,544/t (US$6.14/lb), registering a 13.1% month-on-month increase. This is primarily the result of the Indonesian government announcing a complete ore export ban in 2022.

As progress of downstream nickel processing plants is proceeding reasonably ahead of schedule, the market is speculating that the export ban on nickel might be enforced prior of the deadline in 2022. Concerns regarding a concentrate supply deficit also prevail on doubts if the Philippine government could potentially carry out a similar practice.

In July, global nickel inventory continued to decline. LME nickel stocks fell to 143.7kt, a 12.8% month-on-month drawdown. Meanwhile, SHFE nickel deliverable stocks registered at 22.2kt by month end, showing a slight 2kt recovery. The diminishing global inventory not only indicates a supply deficit from primary sources but provides a concrete bottom-line support for global nickel market prices in the short term. AME estimates global supply deficit to be narrowed from 119kt in 2018 to 84kt in 2019, and global supply demand equilibrium to be reached in 2021.

Nickel sulphate premiums against Class I became negative in July, due to the follow-on effects from China’s diminishing subsidies on New Energy Vehicle (NEV) industry. Without the support of government subsidies, low-end producers are being progressively forced out of the market. This is also reflected in the production of NCM cathode material, which showed a year-on-year decrease of 29% to 13.3kt in June. AME believes that the nickel sulphate market is not likely to materially improve amid weaker demand from both NEV and battery industries.

Refined nickel supply is expected to remain in deficit in the short term, as the market is still digesting inventory which was built up during 2015 – 2016. AME anticipates that this trend is to be reversed after 2021 when primary metal supply exceeds industry demand, stimulated by the exponential growth from NEV market. This is also likely to be when major nickel producers finalise the transition from Class I into nickel sulphate productions.