Nickel consumption in the global battery sector is large, and nickel prices are rising

Since the middle and late April, the market has been worried about the US sanctions against Russian nickel, and the supply tightening is expected to increase. The nickel and Shanghai nickel have risen sharply, setting a new high in the past three years. After Russia’s nickel production and operation activities were normal, the nickel price fluctuated at a high level, and the tight balance between supply and demand will make nickel prices strong and volatile.

The Philippines and Indonesia are major suppliers of global laterite nickel ore. Recently, the Philippine environmental review has not led to a significant reduction in the production of large-scale nickel ore. In addition, Indonesia has relaxed nickel ore export quotas, nickel ore production has recovered, and the total nickel supply in the two countries has tended to be loose. In the first quarter, China's total nickel ore imports totaled 6.57 million wet tons, an increase of 3.55 million wet tons compared with the same period in 2017.

In addition, Australia, Russia, Guatemala and New Caledonia are the major producers of nickel sulphide ore in the world. In the first quarter, China imported more than 250,000 wet tons of nickel sulphide ore from the above four countries. Since nickel sulphide ore is mainly used to produce nickel sulphate, and nickel sulphate is used in ternary batteries, it is bound to drive the import demand of nickel sulphide ore in the context of the rapid growth of new energy vehicle production and sales in China. The current tight supply of nickel sulphide ore led to a decline in refined nickel production. In the first quarter, China's refined nickel output was 37,000 tons, down 5,000 tons from the same period last year.

According to WBMS data, the global nickel market supply and demand gap of 24,000 tons in January and February 2018, the supply and demand gap pressure has not eased. As for nickel stocks, as of May 4, the nickel stocks and LME nickel stocks in the previous period fell by 18,000 tons and 50,000 tons respectively compared with the beginning of this year. Under the background of the decline in the supply of refined nickel and the increasing consumption of nickel in new energy vehicle batteries, domestic and overseas nickel inventories will continue to decline.

With the rapid growth of new energy vehicle production and sales, the demand for nickel sulfate has increased steadily, resulting in tight supply of nickel sulfate. However, the current consumption of nickel for lithium batteries accounts for a very low proportion of total demand, and it is difficult to significantly increase the demand for nickel. At present, the global consumption of nickel in the battery field is about 50,000 tons, accounting for 3% of the total demand; the domestic demand for nickel in the battery field is about 20,000 tons, accounting for 2% of the total demand.

In the field of automotive batteries, ternary lithium batteries and lithium iron phosphate batteries are mainly used. Because of the high energy density of ternary lithium batteries, it can improve the mileage of new energy vehicles, so it is the main development direction. At present, ternary batteries account for about 40% of the battery market, and it is expected that the market share will continue to expand in the future. In the current ternary battery, the ratio of nickel, cobalt and manganese is 6:2:2.

In view of the high price of cobalt, the production cost of the battery is increased. In the future, the ternary battery will develop toward the direction of “high nickel and low cobalt”, and the ratio of nickel, cobalt and manganese may be adjusted to 8:1:1. It is estimated that between 2020 and 2025, China's new energy vehicle batteries will use about 90,000 tons of nickel per year, which will gradually increase in the proportion of total nickel consumption.

Although nickel currently accounts for a small proportion of the ternary battery composition of new energy vehicles, the trend of high nickel and low cobaltization is obvious in the future, which will increase demand for nickel. In the long run, nickel price performance is worth looking forward to, while short-term macroeconomic weakness and US sanctions against Russian nickel have come to an end. Nickel prices have returned to fundamentals, and tight balance between supply and demand will support the high price range of nickel prices.

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