RPT-COLUMN-Nickel & # 39; s electric premium crushed by business strains: Andy Home | Metals and mining

(Does not repeat anything, the opinions here are those of the author, a columnist for Reuters)

* LME nickel price, spreads and inventories: tmsnrt.rs/2MH84lL

By Andy Home

LONDON, September 18 (Reuters) – Nickel has finally succumbed to the price routine of base metals.

It is still the best artist to date with the six core metals traded on the London Metal Exchange (LME)

But with a current $ 12,400 per tonne, LME sells three-month metal, just like the rest of the package, now below the starting level of the year.

The excitement around the potential impulse to the demand for nickel of its use in batteries of electric vehicles has not been completely eliminated.

But the "electric premium" in the price has been crushed by the broader market concerns about the escalating trade upturn between the United States and China.

The tensions between the electrical future of nickel and the current stainless steel reality of the metal are all too obvious and if something becomes more acute, the further the price goes down.

Graphic on price, spreads and stocks of LME-nickel:



Nickel was good in the first half of this year, 25 percent higher in early June, when it traded above $ 15,000 per ton.

Funds were enthusiastic about the story of a step-by-step change in use thanks to the introduction of nickel in the lithium-ion battery technology that stimulates the revolution of the electric vehicle.

It helped that future expectations were supplemented by the bullish reality of rapidly declining nickel exchange reserves.

Inventory is still declining by the day, but there is a growing awareness that a good part of what goes away is simply moved as the battery chain, which needs the class I nickel that is traded on both London and Shanghai, own stocks .

Combined foreign exchange markets have fallen by 162,000 tons this year, but the International Nickel Study Group estimates the global market with a smaller 81,000-ton deficit in the first half of the year.

Disconnection becomes clearer for a longer period.

Analysts at Wood Mackenzie note that the substitution stocks have dropped by 420,000 tonnes since their peaks in late 2017 (LME) and mid-2016 (Shanghai Futures Exchange).

"During this period there was a cumulative shortage on the market of only 145,000 tons, which suggests that 275,000 tons probably have been transferred to private depots." ("Metals & Mining Snapshot", September 18, 2018)

Certainly, there is no evidence of tightness in time – spreads on the London market.

The benchmark cash-to-three-month spread CMNI0-3 was valued at a super-relaxed contango of $ 82 per ton in Monday's assessments.

What Woodmac describes as a "better understanding of this equity movement" was the weakening of the nickel story of the bull, even before the last escalation of the American-Chinese trade war.


The current reality of Nickel's use profile is that the amount of metal that emanates to the battery sector is still overshadowed by the amount used to make stainless steel.

And the stainless steel sector, which has grown explosively, seems potentially vulnerable to any rate-related slowdown in production activity, particularly in China, the world's largest producer.

It does not help that the stainless sector is currently being disturbed by the expansion of Tsingshan's three million tonne facility in Indonesia.

The offshoring of new capacity by the Chinese producer has already led China to open an anti-dumping investigation into its exports to the mainland.

"The export of this cheap stainless steel to China has cut prices and cutbacks, especially on the high-nickel 300 series," said analysts at Morgan Stanley ("Nickel – back to normal", September 10).

Both Morgan Stanley and Woodmac note that Tsingshan has started forwarding shipments to other Asian countries and Europe.

This will alleviate part of the pressure on Chinese stainless plants, but will increase price pressure on all others.

The Indonesian disruption of the rust free supply chain will continue with another Chinese operator, Delong Holdings, who is preparing to launch another two million tons of capacity in the country, according to Morgan Stanley.

This background of oversupply in the rust free sector left it behind, and by extension nickel, particularly vulnerable to the fear of a hit on demand due to trade tariffs.


None of them invalidate the bull's argument that nickel will get an incremental boost over time of its use in electric vehicles.

Not in the last place because battery manufacturers are actively seeking to increase the amount of nickel compared to more expensive cobalt.

But at present, nickel is still dependent on the richness of stainless steel, which in turn is linked to the larger picture of global trade strains.

This tension between nickel as rust free input and nickel as battery input has been simmering for some time.

It is probably getting steeper, the further the price goes down.

Electric dreams have created a worldwide nickel price, while existing producers are wiping out their expansion plans and trying to get new players to part of the expected future action.

In Indonesia Sumitomo Metal Mining and Vale are working together on a new facility of 40,000 tons per year to produce an intermediate product that can be used to make nickel-sulphate of battery quality. Tsingshan is looking to grow out of stainless in the battery sector.

In Australia, the US-based private equity firm Black Mountain will purchase the Lanfranchi mine, which was last produced in November 2015.

The previous owner, Panoramic Resources, placed Lanfranchi on care and maintenance at a time when the nickel price fell below $ 10,000 per ton.

The price has since been restored, but it is now also far away from the June highs above $ 15,000 with the potential for further contamination of the risk-free atmosphere that permeates the industrial metal complex.

Morgan Stanley argues that it is unlikely that the prices of the low points of 2015-2016 will be reviewed, precisely because of curtailments such as Lanfranchi.

But the bank continues to "see that in the longer term a nickel price of more than $ 16,500 per ton is needed to encourage new mines to feed both the stainless and the electric vehicle side of the market."

The problem is that one price may not be suitable for both stainless and electrical requirements.

What the nickel market really needs are two prices, one specifically for battery-usable nickel sulphate.

The LME actively thinks about such a product, but until it exists, the price rises for stainless steel stainless steel batteries continue to exist.

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