Nickel outlook subdued in China, SMM says

In an Aug. 31 webinar, a Shanghai Metals Market (SMM) managing director predicted a likely ceiling on nickel prices in China for the rest of the year. Fancy Li of SMM also remarked that those seeking benchmark nickel pricing in that nation are increasingly turning to SMM and away from the London Metal Exchange (LME).

“The pricing method of imported nickel raw materials in China has changed,” Li said. As portrayed by the SMM staff member, the news service gained a pricing toehold in China from those seeking a benchmark price for battery grade nickel products such as nickel sulfate.

More recently, after extreme price volatility in March that caused the LME to temporarily suspend trading of the metal, Li said traders have been turning to SMM for pricing insight into materials such as mixed hydroxide precipitate (MHP, an intermediate nickel material) and nickel pig iron (NPI).

Regarding the supply and demand of nickel in China, Li pointed to an ongoing supply glut of NPI and other materials being produced in Indonesia and exported to China. The demand for pure nickel has been “squeezed” by the availability of these materials and by increased recycling activity within China, Li indicated.

Li and SMM predict that primary nickel “will be significantly oversupplied” in the third quarter and perhaps the rest of the year in China.

The demand for nickel briquettes, NPI and stainless steel scrap in China also faces limitations currently because of energy-related cutbacks in metals production. Although some stainless steel producing regions are not greatly affected by the cutbacks, said Li, others (such as the drought-stricken Sichuan Province with its hydropower woes) are seeing mandatory output cutbacks.

Figures presented by Li showed stainless steel consumption of nickel units in China having temporarily peaked back in March. Demand for nickel from electroplating operations in China likewise has drifted downward compared with 2021.

The demand for nickel sulfate in the battery and new energy sectors remains on a largely upward trajectory in the nation, however, even in the second and third quarters of 2022 when much of the rest of the Chinese economy has encountered turbulence.

Considering all factors, Li predicted that in the remainder of the third quarter, “The nickel price may continue to decline,” and pointed to the ongoing inflow of imported materials from Indonesia as a culprit.