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Gambled away? Why nickel matte does not weigh on prices
Gambled away? Why nickel matte does not weigh on prices

15 February 2022 – Although there have been attempts to artificially depress the nickel price in recent weeks with nickel matte reports, they have failed. The market is currently very tight and nickel prices are above $ 23,000. The question is whether someone has gambled away here? And the values for aluminium, nickel and stainless steel are also up again today.

Aluminium and nickel remain firm and up

The nickel and aluminium prices on the LME have started this morning again in the plus. From China, stainless steel spot (+1.29%) and futures (+1.38%) continue to rise. Chinese stainless steel scrap is also up by over 1.5%. In addition, February futures contracts are due today not only on SHFE and LME, but also on other exchanges.

Gambled away? Why Nickel matte is not pushing prices down

Nickel matte has been in the news from time to time in recent weeks. While the Chinese Tsingshan Group succeeded in shaking up the first-class nickel prices on the LME and SHFE in 2021, this no longer works in 2022.

What happened to the nickel in 2021?

A press release by the Tsingshan Group had caused the nickel market to collapse briefly in 2021. Suddenly it was possible to produce nickel matte from cheap nickel pig iron (NPI) and then nickel sulphate from nickel matte in battery quality. This led to concerns that there might suddenly be too much nickel on the market and caused prices to tumble. As is well known, this did not last long.

Nickel prices at highest level in 10 years

Nickel availability is holding up strongly. LME nickel prices are over $23,000 per tonne. On the nickel spot market, the highest premiums ever are being paid. In addition, an unknown trader currently holds 50 to 80% of the available warehouse warrants on the LME. And it is apparently not the nickel trader “Big Shot” who is closely linked to the Tsingshan group, as several media report.

Nickel matte becomes an ecological problem

The storm in the nickel-matte water glass could come to a swift and abrupt end in the ecological corner. According to studies, the production of nickel matte is a disaster for the environment. The transformation of nickel matte into one tonne of sulphate alone releases more than 45 tonnes of CO2. This is even higher than the 27 tonnes of CO2 emitted by one tonne of magnesium.

Moreover, the increase in NPI and nickel matte production in Indonesia, the main supplier, also means an increase in hazardous SO2 emissions – which are already 57 times higher than in China.

Chinese government declares war on CO2 emissions

The Chinese government has been waging a consistent battle to reduce CO2 emissions in the Middle Kingdom since 2021 and intends to continue doing so. In addition to steel producers, aluminium and magnesium producers and many other CO2 emitters have also felt the effects of this – cuts in production and energy supply.

A massive increase in CO2 production by converting nickel matte into nickel sulphate directly in China could therefore meet with resistance from the Chinese government.

Moreover, dirty products are bad for the Chinese export economy, given the push towards a green net-zero economy by the Europeans and their American allies.

Saprolite ore: Indonesian NPI resource running out

Saprolite ore resources in Indonesia used for NPI production are limited and proven reserves are only available for 8-9 years. NPI is mainly used in China for stainless steel production. If battery manufacturers are added to the competition, these reserves are likely to be used up quickly and drive up the prices of NPI and nickel matte even further.

High costs for transformation of nickel matte

The transformation of nickel matte into nickel sulphate is not only CO2 and energy intensive, but also expensive. The market talks about the process costing several thousand dollars per tonne. Which makes it altogether less attractive to set up extra production for it and also to amortise it in the face of dwindling saprolite ore.

Nickel matte is not an option for a sustainable battery economy

Nickel matte has proven to be an ecological and financial disaster even before it is really ready for the market and can therefore at best make a marginal contribution to the huge demand for battery raw materials.

China alone wants to sell 10 million New Energy Vehicles per year by 2025. The Europeans are aiming for more than 7 million units per year. The other automotive nations such as Japan, Korea or the United States are not yet included. This will further increase the demand for nickel.

At the end of the day, the question remains whether someone has made a huge gamble here? And “Big Shot”, what are you going to do with your short positions now?

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