“We have two drivers in [nickel] demand: stainless steel and batteries, and nickel inventories have been falling over the last few years,” Macquarie Capital senior commodities consultant Jim Lennon, told delegates at Fastmarkets’ Battery Materials Conference 2019 in Shanghai.

“I think it will [continue to] fall over the next few years; the nickel market will remain in deficit, which should push prices higher,” Lennon said, without giving a breakdown of forecast prices.

Nickel inventories at both LME and SHFE warehouses have been on a downward trajectory since 2018. LME nickel stocks totaled 182,446 tonnes as of April 1, 2019, down by 50% from 368,430 tonnes on January 1, 2018. Nickel stocks in SHFE-approved warehouses have fallen by 80% over the same period to 9,749 tonnes on April 4 from 48,920 tonnes on January 1, 2018.

Lennon concluded the falls reflect deficits and some financial buying of stocks. “Last year there’s probably about 50,000 tonnes of inventories transferred from the LME warehouses in Asia into non-reported inventories in Europe, held by banks and traders, partly for reasons of a positive outlook for the market, or better premiums in the European area,” Lennon said. 

Stainless steel demand still dominates, but the EV sector is growing at a faster pace. Stainless steel takes up 70% of global nickel usage, compared with 6% used by the electric vehicle (EV) sector, according to Lennon.

But EV demand growth is speeding up, he said.

“World production of stainless steel in 2016 grew by 8.5%, 2017 by 6% and last year by 5%. This year, our projection is 3.5-4%, so we do see some slowdown, but still a steady growth rate. Nickel usage in batteries will grow by 30-40% [in 2019], so the underlying growth in nickel [consumption] continues to be quite impressive,” Lennon said.

More nickel briquette was used in the EV sector, following rising demand for batteries, raising the nickel briquette premium over the past year.

Fastmarkets MB’s monthly duty-free nickel briquette premium cif Shanghai stood at $240-270 per tonne at the end of March 2019, up from $220-260 per tonne at the launch of the assessment in August last year.

Nickel briquette is the one of the main raw materials of nickel sulfate, a key material used in the production of nickel-cobalt-manganese (NCM) and nickel-cobalt-aluminium (NCA) batteries used in EVs.

Jim will be speaking at the 7th International Nickel Conference - register today and don't miss out on hearing about Indonesia's future dominant role in nickel's growth, HPAL investment and regional stainless steel production.