No sign of the London Metal Exchange’s nickel short debacle impacting demand and deals for the metal, although pricing remains uncertain with confidence slow to return to trading in the contract.
Price movements remain constrained in nickel and volumes remain low – the Shanghai nickel contract still is seen as more viable.
LME metal traded just over $US31,000 a tonne on Thursday – along way from the $US101,000 a tonne when the squeeze collapsed and trading was abandoned – still up around 25% in the month and double the level of a year ago.
The major influence remains the sanctions on Russia over its invasion of Ukraine which, in the case of nickel, matters because Russia accounts for around 10% of global production.
Adding to the pressure on the price is the continuing demand from renewables – especially battery makers and EV producers like Tesla which this week reportedly signed a quiet supply deal with Vale, the big Brazilian miner which controls some of the world’s major mines in the Sudbury area of Canada (the old Inco operations).
At the same time, UK battery start-up Britvolt (which has nickel major Glencore as a shareholder) has signed a memorandum of understanding with the wealthy Bakrie family of Indonesia which has nickel mining interests in that country.
Britishvolt is looking to nail down supplies of nickel for its giant gigafactory in Northumberland in Britain.
Under the agreement, Britishvolt will initially work with the industrial conglomerate controlled by the Bakries to develop a plant capable of producing a nickel compound that can be used by battery manufacturers.
Once the nickel sulphate facility (which BHP is making in its plant near Perth and will supply to Tesla and Toyota) has been established the two parties will look at the potential to develop a 15GW gigafactory (battery) in Indonesia.
“The deal gives us security of nickel from the largest source in the world,” Timon Orlob, Britishvolt’s chief operating officer told Reuters.
Northvolt, the European battery start-up backed by Volkswagen, said last week it would buy low-carbon nickel for its batteries from Vale’s Canadian mines.
All these are future deals and are not going to affect supply and demand in the short term, but they are both taking metal out of the system and creating a shortage down the track as well as making it harder for other miners to try and match their output to probable demand.
…………
Meanwhile good news this week on demand and supply for the metal for Australia’s still growing list of nickel producers and wannabees which include the likes of BHP, Glencore, Nickel Mines, IGO/Western Areas, Nickel Miners, Mincor, Chalice Mining and Panoramic.
Sumitomo Metal Mining is Japan’s biggest smelter of the metal, making it globally important in nickel and other metals (it still has big copper and gold interests).
Sumitomo Metal supplies cathode materials for the Panasonic lithium-ion batteries used in Tesla EVs, giving the company a birds eye view of the market and the booming battery business.
In an outlook for supply and demand for 2022 published this week, Sumitomo forecast that global demand for nickel used in batteries will rise by more than 20% this year thanks to solid demand for electric vehicles (EVs),
The company said demand for nickel used in rechargeable batteries will climb to more than 410,000 tonnes in 2022 from nearly 330,000 tonnes in 2021.
While nickel is mainly used in stainless steelmaking, its strong growth is coming from battery and EV makers and is set to drive demand for years to come.
Sumitomo Metal also predicted that the global nickel market deficit will narrow to 68,000 tonnes this year from 135,000 tonnes in 2021 as output of nickel pig iron (NPI) in Indonesia is expected to grow to more than 1 million tonnes.
(That’s the business Tangshan Holdings, the company at the centre of the multibillion-dollar LME nickel trading debacle dominates. It is also the business that Australian company, Nickel Mines is involved with Tangshan.)
Global demand for nickel is seen increasing by 8.4% in 2022 to 2.999 million tonnes, while supply is expected to climb by 11.4% to 2.931 million tonnes.
Japan’s nickel demand is projected to rise 0.2% to 170,400 tonnes, while supply is forecast to rise 1.6% to 168,800 tonnes.
But Sumitomo had a cautionary note as well.
“Nickel demand for EVs is growing much faster than we had expected a year ago,” Yusuke Niwa, general manager of Sumitomo Metal’s nickel sales and raw materials department, told a Tokyo press conference this week (according to Reuters).
But he warned higher nickel prices may erode demand in the long term as companies will work to use less nickel or develop nickel-less batteries.
