(Article source: Shanghai Securities News)
A piece of news caused the rising nickel price to drop sharply.
As of the close of the domestic futures market on the afternoon of January 5,Shanghai NickelThe main contract fell more than 5.19% to 220,300 yuan / ton. In the past December 2022, the monthly increase of Shanghai Nickel’s main contract was close to 17%.
Nickel prices in the outer market also fell sharply overnight. As of the close of trading on January 5 local time, three-month nickel on the London Metal Exchange (LME) fell by more than 6%.
On the evening of January 4, Beijing time, news came out from the market: At present, the “Nickel King” Tsingshan Group’s electrolytic nickel project has been officially put into production, with a preliminary design capacity of 1,500 tons per month. It is an OEM for a new energy company in Hubei. Some volumes are released.
The latest data show that metal stocks on the London Metal Exchange have been decreasing significantly recently, falling to the lowest level in 25 years.
The tight delivery pressure is suspended
Nickel prices drop sharply
Industry insiders said that the news suggested that Tsingshan Group, a big short seller in the Lunni market, may have some delivery sources, and the market’s bullish sentiment cooled down, causing nickel prices to fall.
Bai Qiong, a nickel analyst at the Stainless Steel Business Unit of Shanghai Steel Union, told a reporter from Shanghai Securities News that after the new refined nickel project is put into production, the first impact will be to replace the downstream consumption of delivery products, that is, after the new project is put into production, it will ease Delivery products are under tight pressure.
Gu Fengda, director of the research and consulting department of Guoxin Futures, told a reporter from Shanghai Securities News that the current global nickel market is showing a structural mismatch between supply and demand. On the one hand, nickel ore and ferronickel, the main carriers of global nickel resources, are in surplus; on the other hand, refined nickel plates and nickel beans, the delivery products of nickel futures, have been structurally scarce for many years, and the market lacks liquid refined nickel for futures delivery. Nickel inventory – the Lunni squeeze event in the first quarter of 2022 is evidence.
“Tsingshan’s action this time can be described as a slap in the face, which not only eased the market’s tight supply expectations brought about by the reduction of Inno nickel production, but also showed that it has the ability to convert a large amount of nickel intermediate products into refined nickel, which is very important for rebalancing the supply and demand of the nickel market. The contradiction has great demonstration significance.” Gu Fengda said.
Talking about the new capacity of refined nickel in 2023, Bai Qiong said that in 2023, domestic refined nickel projects are planned to be put into operation with more than 92,500 tons. Judging from the progress of commissioning, the newly commissioned projects in the first quarter have a designed annual production capacity of 30,000 tons. Considering that it takes time from operation to production, the projects are mainly put into operation gradually in the second and third quarters.
“In the short term, there is still a large risk of fluctuations in nickel prices. From the perspective of the annual cycle, after a large number of nickel elements are released and product transformation barriers are broken, nickel prices may be under pressure.” Bai Qiong said.
Insufficient deliverables plague the nickel market
Not long ago, another piece of news had a greater impact on the nickel market. One of the world‘s largest nickel producers, Russia’s Norilsk Nickel PJSC (MMC Norilsk Nickel PJSC, referred to as Nornickel), may cut nickel production by about 10% in 2023.
In this regard, Gao Chengjun, the founder and chief researcher of Rongzhi Nonferrous Metals, told a reporter from Shanghai Securities News that as one of the largest nickel producers, if Nuo Nickel reduces its production by 10% in 2023, it will definitely affect the global nickel supply. Nornickel is also one of the delivery brands of the LME. If the output is reduced, it will exacerbate the shortage of LME delivery products.
Gao Chengjun said that nickel is one of the most complex metals. There are many nickel-related products, involving electrolytic nickel, electrodeposited nickel, nickel beans, nickel powder, high matte nickel and so on. The price benchmark for nickel futures is pure nickel, which accounts for less than 30% of global nickel products. As a delivery product, pure nickel is in short supply, and the inventory has been at a low level.
Since last year, the shortage of deliverables has been seriously plagued the nickel market. At the LME Annual Conference Forum in October 2022, Jim Lennon of Macquarie Bank said that the key to nickel price trends is how quickly the LME’s non-deliverable secondary nickel can be converted into primary nickel. In recent years, the supply of nickel pig iron has increased significantly, especially from Indonesia. However, the surplus pattern of nickel is not reflected by primary nickel, but non-LME deliverable nickel.
LME Inventory
to the lowest level in 25 years
According to CCTV news reports, contrary to the expected decline in macroeconomic demand, metal stocks on the London Metal Exchange have been decreasing significantly recently, and have dropped to the lowest level in 25 years.
As of the end of December 2022, the inventory of the six major metal varieties traded on the London Metal Exchange has fallen by two-thirds in 2022, and is currently less than 500,000 tons (more than 2 million tons in 2021), setting a record since 1997. Inventory low. Despite fears of a recession and the pandemic, demand remains strong.
The metals with the worst inventory draws are also facing supply pressure. For example, the inventory of metal aluminum has decreased by 72%, and the inventory of nickel has dropped by 90%. The production of these metals is an energy-intensive industry. Affected by soaring energy prices, metal smelters have reduced or even partially shut down production, especially in Europe.
Although much of the metal goes directly from producers to consumers rather than entering exchange stocks, LME metal inventory levels are still an indicator of actual trading volumes. In theory, a sharp drawdown in inventories is a signal of tight supply and demand in the metals market.
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