Can nickel sulphate respond to the lithium ion battery structural shift?

By Mark Beveridge, Principal, Benchmark Mineral Intelligence —

Nickel has distinguished itself from the other major lithium ion battery chemicals, lithium and cobalt, by rising more than 20% in price since the start of 2019.

The proximate cause has been Indonesia’s decision to ban nickel ore exports next year.

Cut off from their main raw material supply, China’s NPI producers could be forced to cut output, potentially pitching the nickel market deeper into deficit.

More recently, the rapid decline in London Metal Echange (LME) nickel stocks also provided superficial support for the notion that the market was tightening.

Meanwhile, demand for nickel has been polarised between extremes.

Stainless steel production—by far the largest contributor to nickel demand—has disappointed expectations by reflecting the slowdown in industrial production growth in both China and developed economies during H2 2019.

By contrast, demand from the EV battery sector has been buoyant, up around 30% y-o-y by our estimates at Benchmark Mineral Intelligence. But it still represents too small a share of overall consumption at present to alter market fundamentals.

Despite the faster than expected move towards nickel-intensive cathode chemistry, such as 622 and 811, nickel sulphate supply still succeeded in overwhelming demand this year—notably in China where the sulphate was sold at a discount to class 1 material at times.

In the absence of a strong improvement in overall nickel demand, which looks unlikely in the near term, attention will naturally focus on the progress being made at bring new HPAL and NPI capacity onstream in Indonesia.

The HPAL projects will be prime candidates for supplying battery-sector consumers of nickel.

Any evidence that capital or operational costs for these projects are likely to come in either above or below expectation will be leapt upon to justify competing views on future pricing.

The first of these plants is due onstream during 2020.

If that deadline is met, it may be the first good indication that nickel supply is capable of responding to large structural shifts, such as an ore ban or the rapid rise in battery sector demand.

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