Up to this week, the nickel bull story had been roaring along.
Talk of metal shortages and runaway electric vehicle (EV) and hybrid battery demand have supported that story.
But one announcement has seen that bull run hit a brick wall.
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Nickel bull story slows
News that China’s Tsingshan Holding Group has signed a one-year contract to supply nickel matte to Huayou Cobalt Co and CNGR Advanced Material Co, on March 3 prompted a sharp sell-off.
Under the agreement, Tsingshan will supply 60,000 tonnes of nickel matte to Huayou and 40,000 tonnes a year to CNGR, starting from October 2021. Tsingshan is China’s largest producer of stainless steel.
Just this morning, news sources like MetalBulletin were still promoting the bull narrative, saying nickel premiums continue to rise in China, while ore prices set another record high (even as the European cut cathode premium rises a further 5%).
But almost simultaneously, Reuters reported hot-off-the-press details of the Tsingshan deal and a sharp sell-off ensued. The post noted nickel fell 8.5% to $15,945 per metric ton on the LME for the biggest intraday loss since 2016. Shanghai prices fell by the most in nine months. The SHFE June nickel price ended 6% lower at RMB 130,510 ($20,181) per ton, according to Reuters.
Investment and the supply outlook
The Economic Times posted further details, reporting Tsingshan plans to expand investments in Indonesia. Tsingshan plans for its nickel equivalent output to reach 600,000 metric tons this year. Meanwhile, it has a target of 850,000 tons in 2021 and 1.1 million tons by 2023.
Nickel’s narrative has largely been predicated on a shortage of battery-grade metal driven by EV demand.
However, Tsingshan’s supply contract and capacity announcements suggest there will be sufficient supply. As a result, the nickel market reflected a sharp rethink of the deficit view.
Demand undoubtedly remains robust for nickel. Its medium- to longer-term outlook remains positive on the back of stainless and battery demand.
Indonesia’s efforts are finally paying off. The country is ramping up refined metal output, albeit under Chinese control. As a result, output of battery and refined grades of nickel is increasing. Meanwhile output of lower grade nickel pig iron is declining.
Nevertheless, the world does not seem quite as short of nickel today as it did yesterday.
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