Singapore 17/08/2016 - Nickel prices have bottomed in part due to global production shutdowns including among Chinese refined nickel and nickel pig iron (NPI) producers, Yang Zhiqiang, chairman of China’s largest nickel producer, Jinchuan Group, said in a statement on Wednesday.
Given improved fundamentals after capacity shutdowns and potential demand growth, nickel has the best investment potential among metals, Yang said, adding that this bottoming of the nickel price "has yet to be tapped into" in the market.
Since 2015, around 65 percent of nickel producers with production costs of above $10,000 per tonne have shut down due to losses. In China, other than Jinchuan and Xinjiang Nonferrous, almost all of China’s electrolytic nickel producers have shut, Yang said.
Jinchuan has been keeping nickel output low since the second quarter on a lack of nickel ore.
Chinese NPI producers are affected by environmental checks particularly in Shandong and Inner Mongolia with operating rates in the country falling to the current 30 percent, Yang added.
“Nickel supply has stopped increasing,” he said.
China’s primary nickel production (including nickel content of NPI output) will be around 550,000 tonnes this year down 22.5 percent from 2014. Yang did not give a comparison with last year’s number.
Going forward, Philippines’ nickel production is expected to contract by a quarter in the coming six months due to the country’s mining clampdown, with the country expected to follow Indonesia in tightening its ore export policy, he added.
Yang also noted ongoing changes in the demand for nickel. While stainless steel is expected to remain the largest consumer of nickel, continuing to account for around 68 percent of demand, demand for nickel from new energy vehicles is expected to see sharp growth in the coming years.
Nickel usage in batteries is forecasted to increase five-fold to 120,000 tonnes in 2025, far exceeding other non-steel usage, and becoming the second largest user of nickel. Global electric vehicle sales rose 70 percent to 550,000 units in 2015, while those in China more than quadrupled to 340,000 units last year.
The global nickel market will remain deficit for the coming years up till 2020 at least from 2016 onwards, he said.
“The investment opportunity [in nickel] should not be missed,” Yang concluded.
Nickel prices on the London Metal Exchange (LME) had surged in late June, while trading above $10,000 per tonne since mid-July on concerns that the mining clampdown in the Philippines will disrupt nickel ore production and exports.
Prices on the LME and Shanghai Futures Exchange have come under some pressure over the past few days as the effect from the Philippine mining review wanes following a lack of production disruption to major producers.
The LME three-month nickel price was last at $10,200 on Wednesday, down $55 from the previous day’s close. It dipped to a month's low of $10,175 earlier in the day.