TEX Outlook for world nickel production in 2014
The latest outlook for world nickel production showed that there is a strong possibility the production in the calendar year 2014 will be down from the prior year. Supposing the production decreases, it will be for the first time in 4 years.
The biggest reason for the decreased production is because the export of nickel ore is completely stopped due to the new mining act which was enforced in January 2014 and the possibility is remote for a reviewal of this new mining act which leads to the situation that the recovery of ore supply can't be expected.
In China which imports a lot of low grade ore from this country, a drastic decrease in nickel pig iron production is unavoidable, and the production volume throughout the world is anticipated to be less than originally anticipated.
On the other hand, in Europe and USA, the demand for nickel increases more than originally anticipated because of the production of stainless steel and special steel being in good form, and the demand and supply balance which is now in excess supply is likely to turn to the short supply in the period from October to December this year at the earliest.
Respective situations are put in order as follows.
Impact from Indonesia's export ban on nickel ore;
(1). In 2013, the world nickel makers produced about 20% of the world total production by using Indonesian ore. Especially, China imported 41.12 million tonnes of nickel ore which comprised 58% of China's total import of nickel ore in the calendar year 2013. Even if a substitute source is secured or mining companies in other countries increase production, the decrease in supply of raw materials will be almost definite.
(2).Also in Japan, the import of Indonesian high grade ore comprised more than half of the total import. Although the switch of the raw material source and the development of new sources are taking place, it has been thought to be difficult to secure the same quantity as used to be and therefore the production of ferro nickel or nickel wrought is anticipated to decrease.
(3).LME nickel price is propped up by Indonesia's export ban on nickel ore, and has continued to show an upward trend since the beginning of 2014. In addition to supply unrest from countries other than Indonesia coming up, on May 13 when the factors for short term robust economy were prepared, LME nickel price rose to USD 21,500 per tonne temporarily.
(4). Chinese producer is proceeding with the project for several NPI production facilities in Indonesia, and Hanwa Corporation Limited is going to take part in the joint venture planned by Tsingshan Steel Group and a local mining company.
(5). Although many of mining companies and workers in Indonesia demand a reviewal of the new mining act, all of 3 main candidates for the presidential election slated for July support the export ban and therefore the export ban on nickel ore is anticipated to continue.
Impact which affects China's NPI production;
(1). 85% to 87% of China's NPI production depended on Indonesian low grade ore. In 2014 when the ore export ban was imposed, the countermeasures were taken to switch raw materials to Philippine ore and domestic ore, but the production is anticipated to be down by 40,000 tonnes to 50,000 tonnes per year.
(2). Before the new mining act was enforced, China has had a lot of nickel ores as its ore storage stock which reached a level of 32 million tonnes and became equivalent to its consumption for about 8 months. However, the NPI production is anticipated to decrease drastically in the period from October to December due to decreased ore storage.
(3). During 2012 to 2013, many NPI production facilities based on Rotary Kiln Electric Furnace were constructed in China, and many facilities of the same are supposed to be completed in 2014. However, these will be excess facilities if the supply quantity of low-grade ore decreases.
(4). Some of users have begun to switch to ferro nickel and nickel unwrought from NPI, and therefore the consumption of NPI is decreasing.
Demand and supply balance for nickel;
(1). As aforementioned, the anticipation becomes more likely that the production volume will be down from the calendar year 2013, but the demand increases more than originally anticipated because of the production of stainless steeland special steel being in good from in Europe and USA. The background for this is the prices of steel products are anticipated to rise due to the upward trend of LME nickel price, and wholesalers are working to accumulate the stock furthermore. The world production of stainless steel in the calendar year 2014 is anticipated to be about 40 million tons which represents an increase of 7% to 8% versus the prior year, and a certain analysis shows the consumption of nickel also will increase by the same token.
(2). As the sanction against Ukrainian matters, the fear has been voice that Europe and USA will take a step toward import ban on Russian products. By contraries, such a case also can be thought as Russia will ban the export as a retaliation against the economic sanction, and the possibility has come up to the surface that the users in Europe and USA can't import Russian nickel ore and products.
(3). Vale SA stopped operation of Goro nickel plant (New Caledonia) since the leakage of waste liquid occurred on May 7. Thereafter, it is not yet in sight when the operation will restart.
(4). Although 118,000 tons is expected to be supplied from a new nickel project in 2014, it won't be enough to cover the decreased portion and it is not clear whether the shipment can really take place.
(5). LME nickel inventory is 279,138 tonnes as of May 19 and the volume in a total of LME inventory, the ore storage stock in China and the total stockpiles in respective countries is analyzed to comprise about 24 weeks of the world consumption.
(6). There is case the substitute demand for manganese-containing stainless steel (200 series) will be generated if the nickel price soars, and therefore the nickel price and the demand for nickel are not necessarily directly proportional.
(7). Although the steep rise in nickel price accelerates resumption of operation of unprofitable mines and the plans for expansion of existing mines and production increase, there is a high possibility this will be not in time for the demand in 2015 because there is a time lag in contribution to supply.
Outlook for nickel by company;
(1). Goldman Sachs Group, Inc. anticipates LME nickel price (3-month seller) to exceed USD 22,000 per tonne during July to September in 2014.
(2). Norlisk Nickel OJSC, the world's biggest producer sees the demand and supply balance for nickel in 2015 will be in short supply.
(3). Steel & Metals Market Research (SMR), Austria sees the situation of excess supply will continue also in 2014 and 2015.
(4). ERAMET Group forecasts the demand and supply balance for nickel will change to the situation of short supply from the period from October to December in 2014. They also see the situation of short supply will get more serious in 2015, but the balance between demand and supply will recover from 2016 onwards.
(5). Royal Nickel Corporation sees the demand and supply balance in 2015 will be in seriously short supply, and the price will go up. However, they think the demand and supply will be balanced by decreased LME inventory and decreased demand due to price hike.
Source - The TEX Report