Chinese nickel demand from stainless steel and battery materials producers will continue to rise in near future, although extensive investments in nickel projects will cap higher nickel prices, Fastmarkets learned from Antaike's Nickel & Cobalt Conference in Xiamen on November 6-8.
Much of the apparent Chinese demand for nickel over the next couple of years will come from the country's stainless steel sector, which is expected to continue increasing its capacity, delegates at the conference were told.
"Stainless steel is replacing some traditional applications of steel, aluminium and copper," Liu Fuxing, standing vice president of the stainless steel branch of China's Special Steel Enterprises Association, said.
"There are policy-driven factors in China, such as infrastructure and countryside development, that are requiring and providing new opportunities for stainless steel," he added.
Chinese stainless steel production is expected to reach 28 million tonnes in 2018, up 8% from last year, Liu told the delegates.
Although the economic cycle headwinds expected over the next two years will slow down the ramp-up in new stainless steel production in 2019, production growth next year is still expected to be about 6%, according to Liu.
The growth in battery materials production led by expectations of a boom in electric vehicles (EVs) will also drive higher nickel consumption.
"China produced 100,000 tonnes of ternary battery materials in 2017, up 100% from 2016; meanwhile, production is expected to rise about 30% in 2018," Xu Aidong, chief analyst at Beijing Antaike, said.
As a result, there has been aggressive investment by Chinese producers in new nickel projects, especially in Indonesia, in order to secure the resources for these two areas of growth.
Most recently, Chinese cobalt producer Huayou Cobalt announced in November it is to invest in a joint venture with other four companies to build a laterite ore hydrometallurgy plant
producing nickel intermediate products in Morowali, Indonesia.
Another joint venture, comprising Tsingshan Group, GEM, Brunp Recycling, PT Indonesia Morowali Industrial Park (IMIP) and Hanwa Co, announced in October it is to invest $700 million to develop a nickel-cobalt project in Indonesia
Meanwhile, China's Jinchuan Group and Indonesian mining company WP & RKA jointly received approval to export 2.2 million tonnes of nickel ore
from Indonesia in October 2017.
Nickel prices under pressure
But delegates at the conference were also told that this extensive investment in new nickel projects will keep nickel prices subdued.
The three-month nickel contract on the London Metal Exchange (LME) hit an almost three-and-half-year high of $16,690 per tonne on April 19, but the contract has been largely under pressure since then, dropping to $11,495 per tonne on October 31.
Fastmarkets assessed the nickel sulfate min 21%, max: 22.5%, cobalt 10ppm max, China ex-works price
at 25,200-25,600 yuan ($3,639-3,972) per tonne on November 6, compared with 26,000-27,500 yuan per tonne on August 7, the highest level since FastMarkets launched this price assessment in July 2018.
"Optimism over EV battery consumption boosted demand for battery materials, and resulted in relevant price rallies. Lithium was the first to show strong momentum, followed by cobalt, and [this year] witnessed nickel prices rise quickly," Xu said.