Why Is Nickel Crazy?

Abstract: The contradiction between supply and demand is one of the reasons driving the rise of nickel prices, but behind the fierce market situation, more speculations in the industry are "bulk" (led by Glencore) and "empty" (mainly by Tsingshan Group). .

Recently, with the conflict between Russia and Ukraine as the fuse, LME (London Metal Exchange) nickel futures broke out in an "epic" market.

The contradiction between supply and demand is one of the reasons driving the rise in nickel prices, but behind the fierce market situation, more speculations in the industry are that the capital forces of the two sides are "bull" (led by Glencore) and "empty" (mainly by Tsingshan Group).

LME nickel market timeline finishing

On March 7, the LME nickel price climbed from US$30,000/ton (opening price) to US$50,900/ton (settlement price), a single-day increase of about 70%.

On March 8, LME nickel prices continued to soar, rising to a maximum of US$101,000/ton, and then falling back to US$80,000/ton. In the two trading days, the LME nickel price rose by as much as 248%.

At 4:00 pm on March 8, the LME decided to suspend the trading of nickel futures and postpone the delivery of all spot nickel contracts originally scheduled for delivery on March 9.

On March 9, Tsingshan Group responded that it will replace the domestic metal nickel plate with its high matte nickel plate, and has allocated sufficient spot for delivery through various channels.

On March 10, the LME said it planned to offset long and short positions ahead of the reopening of nickel trading, but both sides failed to respond positively.

From March 11 to 15, LME nickel continued to be suspended.

On March 15, the LME announced that the nickel contract would resume trading on March 16 local time. Tsingshan Group stated that it will coordinate with the syndicate of liquidity credit for Tsingshan's nickel holding margin and settlement needs.

In short, Russia, as an important exporter of nickel resources, was sanctioned due to the Russian-Ukrainian war, resulting in the inability of Russian nickel to be delivered on the LME, superimposed on multiple factors such as the inability to replenish nickel resources in Southeast Asia in a timely manner, Tsingshan Group’s empty orders for hedging may not be possible Delivered on time, which created a chain reaction.

There are various signs that this so-called "short squeeze" event has not yet ended, and the communication and game between long and short stakeholders, LME, and financial institutions are still continuing.

Taking this as an opportunity, this article will attempt to answer the following questions:

1. Why does nickel metal become the focus of the capital game?

2. Is the supply of nickel resources sufficient?

3. How much will the nickel price increase affect the new energy vehicle market?

Nickel for power battery becomes a new growth pole

With the rapid development of new energy vehicles in the world, superimposed the trend of high nickel and low cobalt in ternary lithium batteries, nickel for power batteries is becoming a new growth pole of nickel consumption.

The industry predicts that by 2025, the global power ternary battery will account for about 50%, of which high-nickel ternary batteries will account for more than 83%, and the proportion of 5-series ternary batteries will drop to below 17%. The demand for nickel will also increase from 66,000 tons in 2020 to 620,000 tons in 2025, with an average annual compound growth rate of 48% in the next four years.

According to forecasts, the global demand for nickel for power batteries will also increase from less than 7% at present to 26% in 2030.

As the global leader in new energy vehicles, Tesla's "nickel hoarding" behavior is almost crazy. Tesla CEO Musk has also mentioned many times that nickel raw materials are Tesla's biggest bottleneck.

Gaogong Lithium has noticed that since 2021, Tesla has successively cooperated with French New Caledonia mining company Proni Resources, Australian mining giant BHP Billiton, Brazil Vale, Canadian mining company Giga Metals, American miner Talon Metals, etc. A number of mining companies have signed a number of long-term supply agreements for nickel concentrates.

In addition, companies in the power battery industry chain such as CATL, GEM, Huayou Cobalt, Zhongwei, and Tsingshan Group are also increasing their control over nickel resources.

This means that controlling nickel resources is equivalent to mastering the ticket to the trillion-dollar track.

Glencore is the world's largest commodity trader and one of the world's largest recyclers and processors of nickel-containing materials, with a portfolio of nickel-related mining operations in Canada, Norway, Australia and New Coledonia. assets. In 2021, the company's nickel asset revenue will be US$2.816 billion, a year-on-year increase of about 20%.

According to LME data, since January 10, 2022, the proportion of nickel futures warehouse receipts held by a single customer has gradually increased from 30% to 39%, and by the beginning of March, the proportion of total warehouse receipts has exceeded 90%.

According to this magnitude, the market speculates that the bulls in this long-short game are most likely to be Glencore.

On the one hand, Tsingshan Group has broken through the preparation technology of "NPI (nickel pig iron from laterite nickel ore) - high nickel matte", which has greatly reduced the cost and is expected to break the impact of nickel sulfate on pure nickel (with a nickel content of not less than 99.8 %, also known as primary nickel).

On the other hand, 2022 will be the year when the new project of Tsingshan Group in Indonesia will be put into operation. Tsingshan has strong growth expectations for its own production capacity under construction. In March 2021, Tsingshan signed a high nickel matte supply agreement with Huayou Cobalt and Zhongwei Co., Ltd. Tsingshan will supply 60,000 tons of high nickel matte to Huayou Cobalt and 40,000 tons to Zhongwei Co., Ltd. within one year from October 2021. High nickel matte.

It should be pointed out that the LME's requirements for nickel delivery products are pure nickel, and high matte nickel is an intermediate product that cannot be used for delivery. Qingshan pure nickel is mainly imported from Russia. Russian nickel was banned from trading due to the Russian-Ukrainian war, superimposing the world's extremely low pure nickel inventory, which put Qingshan in the danger of "no goods to adjust".

It is precisely because of this that the long-short game of nickel metal is imminent.

Global nickel reserves and supply

According to the United States Geological Survey (USGS), as of the end of 2021, global nickel reserves (proved reserves of land-based deposits) are about 95 million tons.

Among them, Indonesia and Australia have about 21 million tons respectively, accounting for 22%, ranking the top two; Brazil accounts for 17% of nickel reserves of 16 million tons, ranking third; Russia and the Philippines account for 8% and 5% respectively. %, ranked fourth or fifth. TOP5 countries account for 74% of global nickel resources.

China's nickel reserves are about 2.8 million tons, accounting for 3%. As a major consumer of nickel resources, China is highly dependent on imports of nickel resources, with an import rate of over 80% for many years.

According to the nature of the ore, nickel ore is mainly divided into nickel sulfide and laterite nickel, with a ratio of about 6:4. The former is mainly located in Australia, Russia and other regions, and the latter is mainly located in Indonesia, Brazil, the Philippines and other regions.

According to the application market, the downstream demand of nickel is mainly the manufacture of stainless steel, alloys and power batteries. Stainless steel accounts for about 72%, alloys and castings account for about 12%, and nickel for batteries is about 7%.

Previously, there were two relatively independent supply routes in the nickel supply chain: "latterite nickel-nickel pig iron/nickel iron-stainless steel" and "nickel sulfide-pure nickel-battery nickel".

At the same time, the supply and demand market of nickel is also gradually facing a structural imbalance. On the one hand, a large number of nickel pig iron projects produced by the RKEF process have been put into operation, resulting in a relative surplus of nickel pig iron; on the other hand, driven by the rapid development of new energy vehicles, batteries The growth of nickel has resulted in a relative shortage of pure nickel.

Data from the World Bureau of Metal Statistics report shows that there will be a surplus of 84,000 tons of nickel in 2020. Beginning in 2021, global nickel demand will rise significantly. The sales of new energy vehicles have driven the growth of the marginal consumption of nickel, and the supply shortage in the global nickel market will reach 144,300 tons in 2021.

However, with the breakthrough of intermediate product processing technology, the above-mentioned dual structure supply route is being broken. First, low-grade laterite ore can produce nickel sulfate through the wet intermediate product of HPAL process; second, high-grade laterite ore can produce nickel pig iron through RKEF pyrotechnic process, and then pass through converter blowing to produce high-grade nickel matte, which in turn produces nickel sulfate. It realizes the possibility of laterite nickel ore application in the new energy industry.

At present, the production projects using HPAL technology include Ramu, Moa, Coral Bay, Taganito, etc. At the same time, the Qingmeibang project invested by CATL and GEM, the Huayue nickel-cobalt project invested by Huayou Cobalt, and the Huafei nickel-cobalt project invested by Yiwei are all HPAL process projects.

In addition, the high nickel matte project led by Tsingshan Group was put into operation, which also opened up the gap between laterite nickel and nickel sulfate, and realized the conversion of nickel pig iron between stainless steel and new energy industries.

The industry point of view is that in the short term, the release of high nickel matte production capacity has not yet reached the magnitude of easing the supply gap of nickel elements, and the growth of nickel sulfate supply still depends on dissolving primary nickel such as nickel beans/nickel powder. maintain a strong trend.

In the long run, the consumption of nickel in traditional fields such as stainless steel has maintained steady growth, and the trend of rapid growth in the field of ternary power batteries is certain. The production capacity of the "nickel pig iron-high nickel matte" project has been released, and the HPAL process project will enter the mass production period in 2023. The overall demand for nickel resources will maintain a tight balance between supply and demand in the future.

The impact of nickel price hike on the new energy vehicle market

In fact, due to the skyrocketing nickel price, Tesla's Model 3 high-performance version and Model Y long-life, high-performance version using high-nickel batteries have both increased by 10,000 yuan.

According to each GWh of high-nickel ternary lithium battery (taking NCM 811 as an example), 750 metal tons of nickel are required, and each GWh of medium and low nickel (5 series, 6 series) ternary lithium batteries requires 500-600 metal tons of nickel. Then the unit price of nickel increases by 10,000 yuan per metal ton, which means that the cost of ternary lithium batteries per GWh increases by about 5 million yuan to 7.5 million yuan.

A rough estimate is that when the nickel price is US$50,000/ton, the cost of a Tesla Model 3 (76.8KWh) will increase by 10,500 yuan; and when the nickel price climbs to US$100,000/ton, the cost of a Tesla Model 3 will increase. An increase of nearly 28,000 yuan.

Since 2021, global sales of new energy vehicles have surged, and the market penetration of high-nickel power batteries has accelerated.

In particular, the high-end models of overseas electric vehicles mostly adopt the high-nickel technology route, which has led to a substantial increase in the installed capacity of high-nickel batteries in the international market, including CATL, Panasonic, LG Energy, Samsung SDI, SKI and other leading battery companies in China, Japan and South Korea.

In terms of impact, on the one hand, the current conversion of nickel pig iron to high matte nickel has led to a slow release of project production capacity due to insufficient economics. Nickel prices continue to rise, which will stimulate the production capacity of Indonesia's high nickel matte projects to accelerate output.

On the other hand, due to rising material prices, new energy vehicles have started to raise prices collectively. The industry is generally worried that if the price of nickel materials continues to ferment, the production and sales of high-nickel models of new energy vehicles may increase or be limited this year.

Post time: Apr-12-2022