Tsingshan upends nickel markets and stainless costs

The forecast of increased supply of nickel matte from Tsingshan caused nickel prices to fall sharply on Thursday. The new process being used however could tighten nickel pig iron (NPI) supply, Kallanish notes.

Three-month nickel on the London Metal Exchange dropped as much as 8.5% to $15,945/tonne on Thursday, reaching its biggest intraday loss since December 2016. The most-traded June nickel contract on the Shanghai Futures Exchange ended 6% lower at CNY 130,510/t ($20,180.61/t), posting its biggest intraday loss since May 2020.

Chinese private nickel and stainless steel producer Tsingshan Group signed a high-matte nickel supply agreement with Huayou Cobalt and Zhongwei on 1 March and announced the deal on 3 March. According to the agreement, Tsingshan will supply 60,000 tonnes of high-matte nickel to Huayou Cobalt within one year from October 2021 and provide 40,000t of the same product to Zhongwei.

Tsingshan was the first company to produce NPI from nickel laterite ores. Now it is taking NPI and further processing it to high-matte nickel products with a 75% nickel content. It says it will adjust production of NPI and nickel matte according to market developments.

NPI and battery grade nickel markets have hitherto functioned separately. If this new process becomes the norm, growing EV battery demand could mean NPI supply being diverted away from stainless steelmaking.

Huayou also participated with Tsingshan in the investment of a nickel smelter in Indonesia. Huayou said it would also produce some high matte from nickel pig iron.

The announcement has meanwhile alleviated market concerns about the shortage of battery-grade nickel supply. ”Tsingshan’s mass production of nickel matte triggered a supply-side adjustment. The supply bottleneck for nickel sulphate has been broken. There’s limited room for nickel prices to increase,” Huatai Futures says in a note. 

In order to meet demand for nickel for power batteries, Tsingshan began trial production of high-matte nickel in Indonesia in July 2020, and saw formal production begin at the end of last year. With more facilities commissioned in Indonesia, Tsingshan aims to produce 600,000t of contained nickel equivalent in 2021, 850,000t in 2022 and 1.1 million tonnes in 2023.

By Kallanish Team