nickel price

The Stainless Monthly Metals Index (MMI) rose by 4.3% for this month’s reading, as news of a supply deal by China’s Tsingshan Holding Group helped push the nickel price downward.

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Nickel price falls on Tsingshan supply deal news

The nickel price, like most other base metals, surged through the first two-thirds of February.

The LME nickel price reached as high as $19,722 per metric ton as of Feb. 21.

From there, however, the price dropped, particularly after news of supply deals by China’s Tsingshan Holding Group.

Tsingshan will provide a total of 100,000 metric tons of nickel matte to Huayou Cobalt and CNGR Advanced Material, Reuters reported.

“Nickel’s narrative has largely been predicated on a shortage of battery-grade metal driven by EV demand,” MetalMiner’s Stuart Burns explained earlier this month.

“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.”

A price drop at some point was expected.

“It’s expected that the market would see some price corrections,” MetalMiner CEO Lisa Reisman explained. “Now we are looking closely to see if prices break support levels or hold. Most of the base metals appear to have held onto their support, with the exception of nickel.

“However, the falling nickel price will not result in more availability or shorter lead times. In fact, more fabricators and OEMs have started to pursue import options to help alleviate supply chain hiccups.”

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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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This morning in metals news: the U.S. steel capacity utilization rate reached 71.5% last week; the Energy Information released its monthly energy review; and the nickel price continues to move upward.

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Steel capacity utilization rate hits 71.5%

The U.S. steel capacity utilization rate hit 71.5% for the week ended Nov. 21, the American Iron and Steel Institute (AISI) reported.

U.S. steel output for the week totaled 1.58 million net tons, up 0.1% from the previous week but down 13.2% year over year.

For the year through Nov. 21, U.S. output totaled 70.5 million net tons, down 18.6% year over year.

EIA releases monthly energy review

Aside from steel capacity utilization, the EIA released its Monthly Energy Review today, reporting total energy production of 64.46 quadrillion btu through the first eight months of the year.

Fossil fuel production totaled 50.93 quadrillion btu during the period. Meanwhile, nuclear energy production reached 5.57 quadrillion btu and renewable energy production totaled 7.96 quadrillion btu.

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This morning in metals news: U.S. steel imports were down by 22.2% year over year through the first 10 months of 2020; German steelmaker Thyssenkrupp AG is seeking state aid; and the nickel price has bounced back in November after falling during the second half of October.

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U.S. steel imports down 22.2%

U.S. steel imports through the first 10 months of the year totaled 19.3 million net tons, down 22.2% year over year, the American Iron and Steel Institute (AISI) reported.

Steel import market share reached an estimated 17% in October, down from the year-to-date share of 18%.

By product, import permits for oil country goods in October rose 126% compared with the September final import total.

Thyssenkrupp looks to government for aid package

Bloomberg reports German steelmaker Thyssenkrupp is in talks with the German government over a potential aid package.

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This morning in metals news: the nickel price has gained to start the week; Reliance Steel and Aluminum Co. recently released its Q3 results; and, finally, the U.S. imported $19 billion in energy goods from Mexico last year.

The MetalMiner 2021 Annual Outlook consolidates our 12-month view and provides buying organizations with a complete understanding of the fundamental factors driving prices and a detailed forecast that can be used when sourcing metals for 2021 — including expected average prices, support and resistance levels.

Nickel price gains

The LME three-month nickel price gained over the first two sessions of the week.

Closing Tuesday at $15,384 per metric ton, the LME three-month nickel price gained $236 per metric ton over the previous 24 hours.

On a month-over-month basis, nickel is up 6.8%.

Reliance releases Q3 results

In its Q3 financial results, Reliance Steel and Aluminum posted pretax income of $127 million, up from $102 million in Q2 2020.

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There is a looming crisis in the nickel market.

Some would argue it’s a good problem to have. Demand is set to rise on the back of increasing uptake of electric and hybrid vehicles through this decade. More and more governments will mandate the production of electric vehicles (EVs) over internal combustion engine (ICE) autos. In parts of Europe, there will be outright bans on new ICE vehicles inside 10 years.

However, if nickel supply becomes constrained, consumers are going to pay the price.

Nickel market numbers

It should be said that today the problem barely registers as a price lever.

According to a recent McKinsey report, the stainless steel industry consumers 74% of nickel produced today, dwarfing the 5-8% going into batteries.

But the type of nickel required for battery production is what makes supply so sensitive in the future.

As the report explains, there are two types of nickel. Class 1 predominantly comes from the concentration, smelting and refining of sulfide ores. Meanwhile, Class 2 comes from ores, called saprolites and limonites, with higher iron and other (for batteries) levels of contaminants, such as copper.

So, whereas the stainless steel industry, to a large extent, can use a mix of Class 1 and Class 2, the battery industry draws its raw material from just Class 1, representing a more restricted 46% of the nickel supply market.

Worse, after the all the focus on the cobalt market — with its environmental, social, and corporate governance (ESG) concerns from countries like the Democratic Republic of the Congo — major consumers like Tesla are keen to establish long-term supply arrangements with nickel producers in sustainable locations with more robust ESG standards.

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Norsk Hydro’s Alunorte alumina refinery. Source: Norsk Hydro

This morning in metals news: global alumina production rose 2.7% year over year in August; China’s industrial profits fell through the first eight months of the year; and nickel prices have taken a dive over the last month.

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Global alumina production rises in August

Global alumina production in August reached 11,366 metric tons, the International Aluminum Institute reported.

Production of the aluminum raw material was about flat with the previous month. However, August production rose 2.7% year over year, up from 11,079 metric tons in August 2019.

Meanwhile, China’s alumina production totaled 5,910 metric tons in August.

Chinese industrial profits down 4.4%

Although China has bounced back economically in many respects, its industrial profits fell 4.4% during the first eight months of the year, the National Bureau of Statistics of China reported.

As for metals sectors, profit from the ferrous metal smelting and processing industry decreased by 23.1%. Nonferrous metal smelting and processing industry profits fell 5.6%. Non-metallic mineral products industry profits decreased by 3.8%.

Nickel price falls

After rising consistently since late March, the nickel price took a step back in September.

The LME three-month nickel price closed Monday at $14,405 per metric ton, or down 5.52% compared with a month ago.

The price surged as high as $15,671 per metric ton as of Sept. 2, the high for 2020. As for the 2020 low, the LME three-month zinc price dipped as low as $11,142 per metric ton March 23.

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The Stainless Monthly Metals Index (MMI) increased by 4.4% for this month’s MMI value.

Surcharges increase for a third month

While stainless demand continues to remain in line with U.S. flat-rolled producer supply, alloy surcharges are rising for the third month in a row.

Why? The surcharge increases are again due to an increase in the nickel price.

Over the past month, the LME nickel price increased over 6% to $14,433/mt as of Aug. 6.

Similarly, the Chinese nickel price increased to $16,515/mt (or CNY 113,850/mt).

Are rising surcharges causing concern? Make sure your base prices are held fixed. See how service centers negotiate with you.

Nickel price jumps over supply fears

The Mines and Geosciences Bureau reported that Philippines nickel exports declined by 28% year on year to 102,310 tons during the first half of the year.

The export decline made waves on the LME and SHFE, where the nickel price increased.

Top producers reassured the market that no further disruptions are anticipated for the remainder of the year, despite coronavirus cases having increased since the first half of the year.

Moreover, the largest exporter of high-grade nickel, SR Languyan Mining Corp, will likely deplete by the end of this year, according to the Ministry of Environment and Natural Resources of the region. This would mean the Philippines may fail to keep up with their current exports to China, further supporting the nickel price.

Demand in China has remained high. Macquarie analyst Jim Lennon estimated Chinese mills produced 2.88 million tons of stainless steel in July, or a 4.8% year-over-year increase. High-nickel containing 300-series grades of stainless grew 17.5% year over year to 1.46 million tons in July (an all-time high).

However, Lennon still expects a nickel ore surplus of around 100,000 tons for 2020.

Some demand recovery in the U.S.

The Association For Manufacturing Technology (AMT) reported U.S. manufacturing technology orders in June increased to $346.7 million, 56% more than the previous month. June orders, however, increased just 6% from June 2019.

Orders from January to June totaled $1.69 billion in 2020, down 26% year over year.

According to the AMT, manufacturing technology encompasses metal cutting, forming and fabricating. One of the industries that saw the largest order increase was the automotive sector, which almost doubled orders from June 2019. Meanwhile, agricultural equipment manufacturers nearly quadrupled and manufacturers of HVAC and commercial refrigeration equipment more than tripled orders for manufacturing technology.

The AMT expected a similar amount of orders for the month of July as demand bounces back.

Actual metals prices and trends

The Allegheny Ludlum 316 stainless surcharge declined 1.6% month over month to $0.79/pound. The 304 surcharge rose 0.8% to $0.61/pound.

LME primary three-month nickel rose 7.5% to $13,806/mt.

Chinese 316 and 304 cold-rolled coil rose to $2,923.63/mt and $2,106.74/mt, respectively.

Chinese primary nickel rose 8.0% to $15,592.71/mt. Indian primary nickel rose 7.4% to $13.85/kilogram.

FeCr lumps increased 1.3% to $1,490.48/mt.

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As much of the rest of the base metals were lifted this week, nickel remained subdued.

This comes despite an announcement by the Indonesian government that it would relax exports of many minerals but keep in place a ban on nickel ores.

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Several apparently contradictory recent articles have reported the rise in nickel prices following supply disruptions to miners as a result of the spread of the coronavirus.

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Reuters reported that just a few weeks ago market surpluses were expected. In a recent poll of analysts, the median nickel market balance forecast for this year was a surplus of 89,000 tons, while Russian producer Norilsk Nickel last week came out with an even heftier surplus estimate of 149,000 tons.

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