RE: This is very interesting30 Jan 2022 23:27
EUA in the driving seat:
Battery market driving nickel prices: The smoking gun
Suggestions battery makers are hoovering up LME stocks, as they move from a ‘just in time’ production model to a ‘just in case’ bet on the future of battery demand and to shield against shipping delays, could be impacting prices as well.
LME-grade briquettes can be converted into nickel sulphate for batteries where “class 2” forms of nickel like nickel pig iron cannot.
“The only evidence we’ve got is the smoking gun evidence,” Lennon said.
“So in other words, you can look at the rate of consumption of nickel in the batteries in China in each month, and it has kind of plateaued in the fourth quarter.
“But the amount of nickel imports has shot up, so relative to the first half, nickel metal imports into China went through the roof. They went from 10-15,000t a month, to 25-30,000t a month.”
Goldman Sachs, which said the nickel market shifted from a projected 49,000t surplus to 159,000t deficit in 2021, already posted a 12-month target of US$24,000/t in January.
The investment banking giant is projecting a 30,000t deficit this year, up from 13,000t previously, as supply recovers, but is doubtful Indonesia can increase supply rapidly enough to cover the market, leading to “open-ended large deficits from 2025”.
“With close to balanced markets in both 2023 and 2024, then followed by the beginning of the open-ended large deficits from 2025 (113kt), we think nickel is entering a phase of stronger pricing which will sustain moves above the $20,000/t level,” analysts wrote in a client note.
Lennon says it is unlikely prices will remain at current levels throughout 2022 as supply ramps up in Indonesia and Russia, increasing by up to 15% this year.
“If the supply gets delayed, or you get more disruptions, then it can sort of trade in the current range of US$20,000-23,000. The scenario under which prices go to US$25,000-30,000/t I think would have to be something really extreme,” he said.
“The market is quite well balanced between supply and demand. It was in big deficit last year because of the soaring demand, the rate of growth in demand this year will be slower than last year. Last year was kind of a post-COVID recovery.
“The rate of supply growth will be much faster. So it’s kind of a balanced market, in my view, so I don’t see a lot of upward momentum in prices.”
China’s investment in converting class 2 lateritic nickel in Indonesia into matte that can be turned into a battery grade nickel is also increasing, with Tsingshan expected to bring 50,000-100,000t of capacity in this area online this year.
The ability for supply to keep pace with demand is likely to change in the years ahead, however.
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