Monday 20th Aug, 2018

INDUSTRY OPINION: Nickel ore market registers a shortfall

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IN APRIL 2018, the International Nickel Study Group (INSG) forecast the world refined nickel market would register a shortfall of 117,000 tonnes this year – a revision compared with 53,000 tonnes previously forecasted in October 2017 – as they upgraded their expectations of global nickel consumption growth from 5% to 7%. Nickel is most commonly used to make alloys such as stainless steel, with the latter accounting for more than two thirds of primary nickel usage.

While the battery sector is showing strong growth potential due to their increasing usage in hybrid and fully-electric vehicles, the sector remains one of the smallest consumers of refined nickel at present. China drives the production and demand for stainless steel in the world, accounting for around 54% of global stainless steel output in 2017 based on data from the International Stainless Steel Forum (ISSF). China’s stainless steel production increased by 3.4% year-on-year in 2017 to 25.7 million tonnes.

In the first three months of 2018, Chinese imports of nickel ore more than doubled compared with the same period a year ago, reaching 6.6m tonnes. Imports from Indonesia in particular have surged by around eleven times compared with the same period in 2017, reaching 3.3m tonnes over January to March 2018.

This follows the partial lifting of their previous ban on unprocessed nickel ore exports in 2017, which has helped to revive Indonesian nickel ore production. Before 2014, Indonesia had been the largest global exporter of nickel ore, with shipments to China reaching 41m tonnes in 2013.

However, the Indonesia-China nickel ore trade may not reach the same highs as before the export ban, as strict conditions remain in place for allowing exports, and the record shipments in 2013 had been partially driven by stocking activity in anticipation of the export ban.

Nickel ore imports from the Philippines have managed to rise 14% year-on-year to 2.6m tonnes over January-March 2018, even as the government’s environmental crackdown on their mining sector continues. In 2017, the Philippines had remained China’s largest nickel ore supplier accounting for 83% of Chinese imports, even though exports to China fell 4.5%.

While their government now intends to limit mining areas to spur environmental rehabilitation, the Philippines’ top nickel ore producer Nickel Asia Corp still intends to increase nickel ore exports by 13% to about 20m tonnes this year, indicating much uncertainty on the extent and effectiveness of government restrictions.

This article was first written and published by the analysts and researchers at Banchero Costa. It has been re-published with their kind permission. More information from Banchero Costa can be found by visiting their website: http://www.bancosta.com/en/


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