By Tom Jennemann / June 04, 2018 / www.metalbulletin.com /
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There were six key takeaways from Metal Bulletin's Sixth International Nickel Conference in Toronto on Thursday May 31 and on June 1:
A battery conference masquerading as a nickel conference
Conference participants were clearly excited about the looming electric vehicle (EV) battery revolution, which is expected to move into high gear over the next decade.
Nickel is a critical metal in lithium-ion batteries, and all of the speakers and analysts predicted a large-scale, incremental surge in nickel demand while automakers increase EV production.
Global demand for lithium-ion batteries totaled an estimated 100 gigawatt hours (GWh) in 2017 and is
expected to climb to 344.5 GWh by 2021, according to Ajay Kochhar, president and chief executive officer of Li-Cycle Corp.
Meanwhile, nickel demand in the EV space is expected to
rise to 350,000-500,000 tonnes by 2025, up from 36,000 tonnes in 2018, Frank Nikolic, Vale's manager of market intelligence for base metals, said.
Nornickel, the largest refined nickel and palladium producer in the world, also believes that
EV batteries will be a major long-term generator of demand, with an annual growth rate of 24% from 2017-25. This would equate to 440,000 tonnes of new nickel demand by 2025.
This represents a considerable increase in nickel consumption, considering the total global nickel market today is only slightly more than 2 million tonnes per year.
The global deficit is real
After a decade of lackluster fundamentals, the nickel market has finally turned a corner and is now in a structural deficit.
The global refined nickel market ran a deeper deficit of 39,100 tonnes in the first quarter of 2018 against a deficit of 27,100 tonnes a year earlier, according to the International Nickel Study Group (INSG). Additionally, the INSG expects the market to be short 117,000 tonnes this year.
Nornickel expects a modestly smaller 70,000-tonne deficit in 2018 due to strong stainless steel production growth. Yet this would still be less than the 107,000-tonne deficit in 2017 due to Indonesia and China expeditiously increasing nickel pig iron (NPI) production over the past year.
Stocks falling but enough nickel to fill gap to 2021
The trend in warehouse inventories is positive. Shanghai Futures Exchange stocks are currently at a 2018 low of 31,216 tonnes after 1,070 tonnes were removed in the week ended June 1. Elsewhere, London Metal Exchange-listed warehouse stocks have fallen to 286,752 tonnes, a 22% decline since the start of the year.
Although it will be several more years before the market truly faces a major supply squeeze due to NPI production expansions in Indonesia, the approximately 300,000 tonnes of exchange stocks will be enough to fill the near-term deficits.
Stainless market stronger than many believe
EVs might be the shiny new toy, but stainless steel is fueling the increases in nickel prices in 2018.
"EVs get a lot of focus now but there's robust growth in stainless steel," according to Mark Selby, president and chief executive officer of Royal Nickel Corp.
Nickel is projected to grow 5% annually until 2025, largely driven by stainless steel demand, which translates into about an additional 1 million tonnes of nickel "just to meet trend growth," he added.
Nornickel forecasts nickel demand will increase 8% to 2.332 million tonnes this year based largely on a 130,000-tonne increase in Chinese and Indonesian stainless steel production.
"Stainless steel is going to continue to be the main driver of demand growth. Batteries may be growing at a very fast pace but it's from a very low base," Nornickel head of market intelligence Denis Sharypin said.
$18,000-per-tonne nickel needed to spur new capacity
After global stocks are depleted, the market will require higher prices to stimulate production growth from new nickel sulfide or high-pressure acid-leaching (HPAL) projects, which are capable of producing Class 1 nickel for battery applications.
Prices would have to exceed $18,000 per tonne, "for capital to be devoted to the market," Vale's Nikolic said, which is still well above the current level.
The LME three-month nickel contract closed the official session at $15,295 per tonne on June 4.
Yet $18,000 isn't the magic number
But conference participants noted that it's going to take more than just a quick spike in prices to encourage new nickel projects, considering how much capital is involved and how hesitant producers might be given the past decade of fairly low LME prices.
Large mining companies need the price to remain above $18,000 for about 18-24 months to feel "comfortable" enough to invest in a nickel project that can cost several billion dollars, according to Barry Jackson, principal market analysis of nickel at Anglo American Marketing Ltd.
Millicent Dent, Toronto, contributed to this article.