Prices of nickel soared since the start of 2018 as downstream consumption from batteries for electric vehicles grew and inventories of nickel briquette fell across LME warehouses. Environmental restrictions that limited domestic output also drove prices, said senior engineer and analyst of Jinchuan Nickel Cobalt Research, Du Guangyan.
Du took a bullish outlook on prices of nickel in the near future. Prices are likely to rise further to 125,000 yuan/mt this year, and dip from highs around August as output grows on high profits across smelters, he expected.
The SHFE nickel 1807 contract jumped to a high of 120,000 yuan/mt on Friday June 1, and closed at 116,110 yuan/mt, up 2,350 yuan/mt from Thursday May 31.
Consumption of nickel sulphate rose as the electric vehicle market favoured the new type nickel manganese cobalt (NMC) 811 battery in 2018. Such batteries have a high energy density and are low cost, compared to traditional lithium-ion batteries.
Nickel sulphate accounts for 80% of cathodes in an NMC 811 cell but battery chemists still aim to increase nickel content and reduce the use of high-cost cobalt, Du explained.
He expects the domestic output of NMC 811 batteries to reach 25,000 mt this year.
Electric vehicles accounted for about 77% of the 320,000 mt of nickel sulphate that China consumed in 2017. Domestic nickel sulphate consumption grew at an average annual rate of 30%, according to Du.
He added that LME nickel inventories, especially that of nickel briquette, declined quickly on fewer deliveries to LME warehouses in recent weeks. Nickel briquette is the main raw material for producing nickel sulphate, Du said.
As of Wednesday May 30, LME nickel inventories registered 17 consecutive days of decline to 292,098 mt, a low since June 2014. Nickel stocks across SHFE warehouses stayed at a low in two and a half years at 26,940 mt on Thursday May 31, SMM learned.
Some 1,000 mt per month of ferronickel output was affected as small ferronickel plants, especially in Shandong province and Inner Mongolia, faced cuts or suspensions on stricter environmental inspections.
As many substandard small ferronickel producers close, the high season for stainless steel is likely to extend to August this year as orders may transfer to large plants, Du believed.