SunSirs: Nickel may not be Strong in the Second Half of the Year

1. Trend analysis

In the first half of 2020, nickel prices fell first and then rose. According to data from SunSirs, the nickel price was 113,733.33 yuan/ton at the beginning of the year and 103,033.33 yuan/ton in the middle of the year, down 9.41% and down 7.99% year-on-year. The highest point in the first half of the year was 114,983.33 yuan/ton on January 13 and the lowest point was 92,116.67 yuan/ton on March 19, with an amplitude of 24.82%.

2. Market analysis

Shock fell (late January-March): From January to March, due to the impact of COVID-19, Chinese production resumed slowly, and the enterprise was almost stagnation. In particular, the demand for downstream civilian fields of the terminal was significantly affected by the coronavirus infection epidemic, including stainless steel products (construction, decoration, tableware, equipment), electroplating (cars and sanitary ware), batteries (cars, 3C digital), which has caused nickel prices to fall again and again.

After a slight rebound (late March - June) into the second quarter, with the resumption of domestic enterprises and production, the reduction of nickel mines in the Philippines has reduced the supply closure compared to the previous period, and the spot price of nickel pig iron stopped falling and became firm due to consumption. Improvement and shrinkage of some supply links, the overall balance of supply and demand has improved significantly compared with the first quarter, and a small amount of destocking can be achieved. However, due to the inventory pressure of downstream stainless steel, prices are difficult to improve, and stainless steel mills are unwilling to significantly reduce production, dragging nickel prices to rebound. The nickel price rebounded slowly.

Imports of nickel ores and concentrates from January to May 2020

China's total nickel ore imports from January to May 2020 are approximately 6.649493 million tons, a year-on-year decrease of 24.02%. As the first year of Indonesia’s total ban on the export of nickel ore, domestic nickel ore imports were affected. In addition, due to the epidemic, nickel ore shipments in the Philippines were also suspended. The imports of China’s two major lateritic nickel ore importers fell sharply. Total mine imports fell off the cliff. According to data from the General Administration of Customs, China’s imports of nickel ore and concentrate in May were 1,680,734 tons, an increase of 24.83% from the previous month and a decrease of 67.6% from the same period last year. Among them, the Philippines is China's largest supplier of nickel ores and concentrates. China imported 1,342,841 tons from the Philippines in May, an increase of 22.4% month-on-month and a year-on-year decrease of 60%.　

Downstream stainless steel trend

According to SunSirs price monitoring, in the first half of 2020, stainless steel declined first and then weakened slightly. The price of stainless steel at the beginning of the year was 13,366.67 yuan/ton, a slight decrease of 8.48% to 12,233.33 yuan/ton during the year. The lowest price during the year was 11,358 yuan/ton on April 9 and the highest price was 12,575 yuan/ton on May 13, with an amplitude of 10.71 %. Affected by the epidemic after the year, the stainless steel market almost stagnated and did not pick up until March. However, the output of stainless steel mills remained sluggish in March, and the oversupply of nickel pig iron was still obvious; although the shipment of stainless steel improved, the supply was more due to the backlog in the previous period. The accumulation trend has not stopped. In the second quarter, stainless steel prices are unlikely to pick up due to inventory pressures. Stainless steel plants are reluctant to reduce their production substantially, which ostensibly supports nickel demand. However, in this type of consumption that cannot be transmitted to the terminal, stainless steel prices are difficult to rise.

Domestic imports of nickel pig iron increased significantly

Due to continued tight supply of nickel ore, domestic imports of nickel pig iron have increased significantly. With the continuous production of local NPI projects in Indonesia, the shortage of nickel ore supply will be compensated by Indonesian nickel iron. In 2020, the increase in Indonesia's NPI will compensate for the decrease in China, and the total amount will continue to grow, but the growth rate will decline to 15%. From January to June 2020, Indonesia's cumulative production of ferronickel is 254,200 tons of nickel, and China's 249,900 tons of nickel. Indonesia has achieved output overtake and become the largest producer of ferronickel. In addition, the production of stainless steel is basically stable, and the demand has not changed much.

Summary

Although the supply of nickel ore is tight, the supply of nickel pig iron is replenished. In the second half of 2020, nickel itself is fundamentally empty. The excess of nickel pig iron exceeds expectations. The overall recovery of pure nickel consumption will still be excessive. However, nickel Low prices are also supported. The prices of imported laterite nickel ore are at a high level and stainless steel production is generally stable. Therefore, the nickel price in the second half of the year may be slightly weak and volatile.

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