Nickel price performance triggered by good demand, high nickel iron replaces pressed nickel plate

At present, most European and American countries have announced plans to ban the sale of fuel vehicles, focusing on the period from 2025 to 2030. China has not yet issued a ban on the sale of fuel vehicles, but it is also considering that Hainan Province has announced plans to ban the sale of fuel vehicles in 2030. At present, the proportion of nickel used for stainless steel in electrolysis in China is close to 60 %, the demand for nickel-based alloys and electroplating industries is low, and the battery industry has a small base, but its demand for electrolytic nickel and nickel sulfate also reaches 8 % to 9 %, and the growth rate is strong. In the future, the battery industry's demand gradually occupies an important position.

Demand good to trigger nickel price performance

Some large car companies around the world have also announced plans to stop production of fuel trucks, and a large number of electric vehicles will be converted after 2020. At present, China's new energy vehicle production accounts for less than 3 % of total automobile production, and there is tremendous room for growth in the future.

As the state's subsidies for new energy vehicles shift to high-energy density batteries, it will speed up the process of increasing the market share of three-way batteries and the nickeling of three-way batteries from height. There are two types of ternary batteries: NCA and NCM. NCA technology is mainly monopolized by Japanese and Korean companies. China's ternary batteries are basically NCM. In 2017, the main domestically produced ternary batteries were NCM523. With the shift in national subsidy policies and the high price of cobalt, manufacturers reduced the cobalt content. The increase in the mileage requirements of new energy vehicles has resulted in the transfer of ternary battery technology to NCM622 and NCM811. If NCM811 gradually replaces NCM523 in the future, the nickel consumption of ternary batteries will be greatly increased. At present, the output of ternary batteries grows at an annual rate of more than 50 %. With the acceleration of the process of high nickel conversion, the year-on-year growth rate of ternary batteries will continue to rise, and there will be an important impact on nickel prices within 2020. If there is no alternative battery without nickel in the later period, the nickel price prospects are relatively bright.

High Nickel Iron Substitute Nickel Plate

At present, high nickel pig iron has limited space for further substitution of electrolytic nickel. The stainless steel industry is the largest consumer of nickel electrolysis. With the gradual substitution of nickel pig iron for nickel electrolysis, the demand for nickel electrolysis in this industry gradually decreases, but the current substitution may be close to the limit. The share of electrolytic nickel in stainless steel production will be maintained at the current level in the next few years, unless there is a significant increase in the nickel content of high nickel pig iron. With the export of Indonesian nickel ore, China's high nickel pig iron grade will be improved, but the increase will be limited.

The supply structure is difficult to convert, and the output of large refined nickel companies tends to decline. The wet smelting of clay nickel mine will become a new increase in the supply of refined nickel in the future. However, the process has a huge investment and a long construction period. There is no new wet smelting production capacity in the short term. If the nickel price continues to be high in the future, it may gradually increase. More wet smelting capacity. The biggest new bright spot in the future is nickel sulfate. The increase in nickel sulfate production capacity will crowd out the sulfide resources of refined nickel, and nickel beans are more suitable as raw materials for nickel sulfate. In the future, the inventory of nickel beans will appear faster. Digestion, good for nickel prices.

Global refined nickel stocks continue to decline

As of April 13, global refined nickel dominant inventories fell 27.67 % year-on-year, with LME nickel inventories down 15.29 % year-on-year. Since October 2017, the nickel inventory has experienced a six-month decline, a drop of nearly 75,000 tons, of which the nickel plate inventory has dropped by more than 40,000 tons, and the nickel bean inventory has experienced a first increase and then dropped. The current position has fallen from the highest level in December 2017. Nearly 48,000 tons. At the same time, Shanghai's nickel inventory also dropped by 20 %, a decrease of more than 10,000 tons, while China's nickel inventory in the bonded area slightly increased. Downstream demand is only part of the decline in refined nickel inventories at home and abroad, as well as some hoarding demand that looks good for the future, indicating that the market is more optimistic about the price of nickel in the medium and long term.

Taken together, although we are optimistic about the price of electrolytic nickel in the medium and long term, there are still some concerns in the short term. Stainless steel industry, as the largest consumer of electrolytic nickel, is currently in a state of serious overcapacity and most enterprises in the industry are losing money. In early April, the social stocks of stainless steel in Wuxi and Foshan remained at a historically high level. The import of stainless steel in Qingshan, Indonesia, a large amount of storage during the Spring Festival, and the lack of obvious bright spots after the Spring Festival this year led to a large supply pressure in the stainless steel market. The recent rise in nickel and the continuous decline in stainless steel have led to the expansion of losses in stainless steel mills. If the inventory pressure has not been digested in the later period, the weakening of stainless steel prices will inevitably drag down the upward trend in nickel prices. However, we understand that due to the poor market atmosphere, stainless steel downstream enterprises in a long-term low inventory state, once the demand appears bright spot, this part of the demand brings a large short-term increase. We are still optimistic about the prospects for the stainless steel industry. Demand will maintain a relatively fast growth rate. However, in the short term, excessive supply growth will lead to serious overcapacity. If stainless steel mills lose long-term losses, it will result in reduced production, which will slow down nickel prices. But we don't think it will affect the overall rise in nickel prices.

We believe that the prospects for nickel prices are bright, but in the short term due to the impact of the stainless steel industry, as well as the Sino-US trade friction and the concern that the Chinese economic data are weak, nickel prices in the short term may be more tortuous, but the shock or is precisely the process of building momentum.

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