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Nickel Price Update: H1 2021 in Review

Here’s an overview of the main factors that impacted the nickel market in H1 2021, and what’s ahead for the rest of the year.
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This article was originally published by Investing News Network

Click here to read the previous nickel price update.

Nickel performed with volatility in the first six months of the year, with prices touching almost US$20,000 per tonne during H1. 

The metal was unable to hold its gains and fell sharply to rebound again by the end of the second quarter.

With the second half of the year now in swing, the Investing News Network (INN) caught up with analysts, economists and experts alike to find out what’s ahead for nickel supply, demand and pricing.

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Nickel price update: H1 overview

Nickel started the year trading at US$17,344, following an uncertain 2020 that saw the metal fall in Q1 and bounce back by the end of the year. Speculation surrounding demand for electric vehicles (EV) batteries drove prices last year, with many analysts agreeing that the levels seen were not reflecting the market’s fundamentals.

So far in 2021, nickel’s story has been volatile. Prices hit their lowest point in early March at US$15,907 — just a few days after hitting their highest level of the period in late February at US$19,689.

nickel price chart

Chart via the London Metal Exchange.

The nickel price tanked in early March after Tsingshan’s announcement that it would convert nickel pig iron (NPI) into nickel matte to serve the battery sector, Jack Anderson of Roskill told INN.

Further explaining the news and its impact on the sector, Karen Norton of Refinitiv said that this raised concern that potentially a substantial amount of the country’s vast NPI industry could adapt to satisfy demand for both the stainless steel and battery sectors.

“Production of matte via this route is not the cheapest, has yet to be proven on a commercial scale, but at the very least it might provide a short-term solution to an anticipated supply crunch in nickel sulfate,” she added.

Nickel continued to perform in a chopy fashion throughout the first half and ended the six month period trading at above US$18,000.

“(This was due to) strong demand from the stainless steel and battery sectors,” Anderson said. “The narrative for strong nickel demand from batteries amid President Biden’s US Green New Deal for an economic recovery and general tightness in the nickel market, has also helped to support prices.”

Nickel price update: Supply dynamics

As the second half of the year unfolds, Anderson expects supply to increase in H2 as the rapid ramp up of NPI operations in Indonesia, which would feed integrated stainless steel operations in Indonesia and exports to Chinese mills, takes place.

“Jiangsu Delong commissioned the second phase of its stainless steel operation in April in Indonesia, resulting in a strong rise in stainless steel production in the country,” Anderson said. “Additional NPI lines are expected to be commissioned in Weda Bay, Indonesia, which should push supply higher still.”

Chinese NPI production could also be higher than initially expected as producers increasingly import nickel ores from the Philippines.

“We have seen supply disruption due to flooding of two of Nornickel’s Polar mining operations during H1, but these issues have now been resolved and supply should return to normal during H2,” Anderson said. “We will be paying close attention to Vale’s Sudbury operation which has been hit by strike action amid negotiations over worker’s terms.”

Despite these disruptions, Anderson said Class I nickel production from Ambatovy in Madagascar will continue to ramp up through H2 as will mixed hydroxide product (MHP) supply from Prony Resources’ Goro operation in New Caledonia.

Commenting on the biggest challenge faced by nickel miners today, Anderson said one of them is the increased scrutiny of the environmental social governance credentials of projects and operations.

 

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“Particularly producers of nickel destined for the EV batteries, where customers are inherently conscious of the environmental and social impacts of their purchase,” he said.

Anderson explained that nickel miners will increasingly face competition from high pressure acid leach (HPAL) projects being developed very quickly in Indonesia at relatively low capital costs (for HPAL technology) and will produce large volumes of battery-grade nickel products.

“But one difficulty these projects have faced is demonstrating their ESG credentials, relating to greenhouse gas emissions and tailings disposal methods,” he said. “Investors involved in these Indonesian projects, last year, bowed to pressure from stakeholders along the supply chain when they opted against deep sea tailings placement as a controversial method of tailings disposal.”

For Norton, the technology that is being relied upon to deliver a large part of the additional nickel units needed for EV battery demand growth, and its ability to come on line without hiccups and in a timely fashion, is one of the biggest challenges for miners going forward.

“Prices being sufficiently high to secure financing for some of these projects, along with increasing environmental concerns that may increase opposition,” she said. “Also, companies increasingly will have to prove their environmental credentials to key consumers.”

A bit further ahead, Norton added, recycling will play a greater role, such that the ability to secure funding may meet considerable obstacles.

Nickel price update: Demand

Despite the speculation around demand from the battery segment, production of stainless steel, which accounts for around 70 percent of nickel demand, will be the key driver for years to come, Norton said.

“Indeed, stainless output in both China and Indonesia has grown strongly in the first part of 2021,” she said. “In China, the picture benefits in part from comparison with the COVID-19 related decline in the early months of 2020, while Indonesia’s still fairly nascent stainless sector continues to ramp up.”

Refinitiv forecasts that the nickel market overall will be either side of balanced both this year and next, as strong supply growth offsets the sharp jump in demand in 2021 that will be followed by more subdued, albeit still reasonable growth next year.

Commenting on how demand will perform overall this year, Olivier Mason of Roskill said demand from the stainless steel market is likely to remain strong.

“Crude stainless steel production in China is likely to remain higher on a year-on-year basis and Indonesian stainless steel mills are ramping up towards capacity,” he said.

Demand from the batteries segment should also remain strong as sales of electric vehicles are expected to continue rising.

“EV sales are expected to be higher year-on-year in the second half of 2021,” Mason added.

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Nickel price update: What’s ahead?

Looking ahead to how prices could perform the rest of 2021, volatility in the nickel price is likely to remain through H2.

“However, as production of low-cost NPI from new rotary kiln electric furnace lines in Indonesia continues to ramp up quickly through the year and production returns to normal at Nornickel’s operations, there could be some downward pressure on the nickel price, or less of an impetus to push prices higher,” Anderson said.

When asked about factors to watch out for that could impact the nickel market in the second half, Anderson said to keep an eye on Indonesia.

“The continued acceleration of NPI ramp up from Indonesian operations in H2 will likely lead to a market surplus despite strong demand from stainless steel mills in Indonesia and China,” he said.

On the battery side, investors will be keeping tabs on the success of the ramp up of the PT HPAL operation to produce MHP and nickel sulfate on Obi Island, Indonesia, which commissioned operations in May.

“If ramp up takes place according to plan, the operation will represent a blueprint for future HPAL developments in the country,” he said. “Another source of nickel for the battery market will come from matte produced via NPI conversion.”

In terms of long term supply, availability of recycled material is expected to increase considerably over the decade as more batteries reach their life span and collection rates for both battery and non-battery scrap are expected to improve over the coming years, Anderson said.

“This would represent an additional feedstock source for future nickel sulphate production alongside intermediate nickel products and dissolving of Class I nickel,” he added. “The majority of growth from recycled sources is expected to come from recycling of batteries.”

For Norton, if demand falls short of expectations as China’s economy slows, prices may suffer a setback.

“Indonesian stainless steel production may help to compensate if it maintains current stellar growth, but if it falls short the demand picture will look considerably less bullish,” she said.

On the supply side, what happens in Indonesia, particularly with regard to Tsingshan’s production and supply of high grade nickel matte for EV batteries, is a key catalyst to pay attention to in H2.

Don’t forget to follow us @INN_Resource for real-time news updates!

Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

 

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The post Nickel Price Update: H1 2021 in Review appeared first on Investing News Network.

Base Metals

ArcelorMittal plans major EAF, DRI investments for decarbonizing steel production in Canada

ArcelorMittal announced with the Government of Canada its intention for a CAD 1.765-billion (US$1.4-billion) investment in decarbonization technologies…

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ArcelorMittal announced with the Government of Canada its intention for a CAD 1.765-billion (US$1.4-billion) investment in decarbonization technologies at ArcelorMittal Dofasco’s plant in Hamilton.

At the heart of the plan is a 2 million tonne capacity Reduced Iron (DRI) facility and an Electric Arc Furnace (EAF) facility capable of producing 2.4 million tonnes of high-quality steel through its existing secondary metallurgy and secondary casting facilities.


Innovative DRI. Source: ArcelorMittal


Modification of the existing EAF facility and continuous casters will also be undertaken to align productivity, quality and energy capabilities between all assets in the new footprint.

The intended investments will reduce annual CO2 emissions at ArcelorMittal’s Hamilton, Ontario operations by approximately 3 million tonnes—approximately 60% of emissions—within the next seven years.

ArcelorMittal will introduce new manufacturing processes that contribute to a considerable reduction of CO2 emissions and deliver other positive environmental impacts including the elimination of emissions and flaring from coke-making and ironmaking operations.

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Smart Carbon. Source: ArcelorMittal


The investment is contingent on support from the governments of Canada and Ontario. The Government of Canada announced it will invest CAD 400 million (US$321 million) in the project. The company is in discussions with the Government of Ontario regarding its support.

The new DRI and EAF will be in production before the end of 2028.

This project is part of ArcelorMittal’s new global 25% CO2 2030 emissions reduction target which was announced yesterday in our second climate action report. DRI-EAF technology, such as that being introduced in Dofasco, is at the heart of our new target although we do also continue to develop our smart carbon technology route. Transitioning from the blast furnace route to the DRI-route offers an immediate significant reduction in emissions in the first phase through natural gas and then in a second phase, which we call innovative DRI, harnessing green hydrogen or other Smart Carbon technologies.

This is the first significant decarbonization project we have announced outside Europe and again reflects ArcelorMittal’s determination to lead the decarbonization of the steel industry. Across the company our people are highly motivated to demonstrate that steel can reach net zero and will be the core material for a carbon-neutral world. This project in Dofasco is a very significant and important milestone in this journey.

—Aditya Mittal, CEO ArcelorMittal

ArcelorMittal has an ambition to be net-zero by 2050. The company recently published its second group Climate Action Report in which it set a new 2030 global carbon emissions intensity reduction target of 25%. It has also increased its European 2030 carbon emissions intensity target to 35%, from 30%.

ArcelorMittal estimates the cost of achieving its global 2030 carbon reduction target is around US$10 billion and believes government funding support of approximately 50% is required to enable the company to remain competitive regionally and globally through the transition period given the capital investment required and higher operating costs of low-carbon steelmaking technologies.

The company expects to deploy approximately 35% of this $10-billion investment by 2025 with the remainder in the second part of this decade.

The Company has developed two technology pathways, Smart Carbon and Innovative DRI, both of which it believes will have an important role to play in helping the company achieve net zero by 2050.

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Energy & Critical Metals

Tata Steel contracts for 27 electric trucks for transportation of finished steel in India

As part of its sustainability initiative, Tata Steel is partnering with an Indian start-up to deploy electric trucks for its steel transportin India. This…

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As part of its sustainability initiative, Tata Steel is partnering with an Indian start-up to deploy electric trucks for its steel transportin India. This marks the first use of EVs by any steel producer in the country for transportation of finished steel.


The electric trucks feature a 230.4 kWh Lithium-ion battery pack with a cooling system and a battery management system giving it capability to operate at ambient temperatures upto 60 °C (140 °F). The battery pack will be powered by a 160-kWh charger setup which would be able to charge the battery from 0 to 100% in 90 min. With zero tail-pipe emission, each electric vehicle would reduce the GHG footprint by more than 125 tCO2e every year.

Tata Steel has contracted for 27 EVs, each with a carrying capacity 35 tonnes of steel (minimum capacity). The company plans to deploy 15 EVs at its Jamshedpur plant and 12 EVs at its Sahibabad plant. The first set of EVs for Tata Steel are being put in operation between Tata Steel BSL’s Sahibabad Plant and Pilkhuwa Stockyard in Uttar Pradesh.

At a virtual ceremony organized on July 29, Tata Steel formally flagged-off the loaded vehicle at the Pilkhuwa Stockyard to move to the Sahibabad plant, 38 km away.

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Base Metals

If Coal Is Dead, Then Why Are Ships So Full Of It?

If Coal Is Dead, Then Why Are Ships So Full Of It?

By Greg Miller of FreightWaves,

Amid all the talk of global warming, climate change-induced…

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If Coal Is Dead, Then Why Are Ships So Full Of It?

By Greg Miller of FreightWaves,

Amid all the talk of global warming, climate change-induced catastrophes, decarbonization and green finance, the global trade in “dirty” coal is enjoying an ironic renaissance. Bulk ships are busy transporting coal to Asia — and to eco-conscious Europe — boosting freight income for some of the very shipowners who publicly tout their environmental bona fides to investors.

“Turns out the news of the demise of coal has been greatly exaggerated,” said Stifel analyst Ben Nolan in a new client note. “Despite an unseemly carbon footprint, coal demand is actually accelerating this year.”

Freight rates buoyed by coal

Coal is transported aboard larger bulkers known as Capesizes (ships with a capacity of around 180,000 deadweight tons or DWT), as well as on sub-Cape vessels such as Panamaxes (65,000-90,000 DWT) and Supramaxes (45,000-60,000 DWT).

According to Clarksons Platou Securities, Capesize spot rates averaged $32,800 per day on Monday, with Panamaxes at $31,800 and Supramaxes at $31,600. It’s rare in dry bulk shipping for all three segments to simultaneously top $30,000, as they have for the past five weeks.

“Strong activity in the coal markets as well as robust minor bulk volumes remain the driving force of elevated rates across the different asset classes,” said Clarksons.

The Financial Times recently pointed out that coal commodity pricing is outpacing both real estate and financial stock returns this year. The price of high-grade Australian thermal coal (used for power generation) had risen to $151 per ton as of Friday, more than triple its price last September, according to Argus. The price of semi-soft Australian coking coal (or metallurgical coal, used for steel production) was $127 per ton, up almost 80% year to date.

“Year-to-date thermal coal exports from the U.S. Gulf Coast, where exports tend to be very price- and demand-sensitive, are up 194%,” said Nolan.

Thermal coal demand drivers

Some of the extreme weather events being attributed to global warming are now increasing demand for seaborne shipments of high-carbon-emitting coal.

Exceptionally hot weather has hiked electricity usage, which is simultaneously being pushed up by growing economic activity. Higher electricity usage increases demand for thermal coal imports. “This year, a hot summer in Asia has led several of the big consumers, which had been shifting away [from coal], to not shift at all,” said Nolan.

A drought in May in southern China cut that region’s access to hydropower, an alternative to coal. More recently, the problem has been too much water in northern China. This month’s tragic floods in Zhengzhou are curtailing coal moves from inland sources. China’s state planner reported that coal transport from Inner Mongolia and Shanxi through Zhengzhou to eastern and central China has been “severely impacted.”

Hot weather is simultaneously boosting prices and lowering reserves of natural gas, which competes with thermal coal for power generation. “Even in Europe, which is the epicenter for decarbonization, low natural gas inventories are driving a sharp increase in thermal coal imports from virtually every nation,” said Nolan.

Restocking for winter

Summer demand will be complemented by restocking for winter demand and inventory rebuilding in general, as well as by demand for coking coal for steel production.

Maritime Strategies International (MSI) noted in its monthly outlook, “China’s National Development and Reform Commission has announced plans to build stocks of over 100 million tons of ‘deployable coal reserves,’ but domestic coal stockpiles are at their lowest levels since February.”

It’s not just China. According to Braemar ACM Shipbroking, “In preparation for the winter season, South Korea, among other nations, has increased coal purchases to avoid energy supply deficits.” South Korea’s July coal imports are on track to hit a five-year high.

Nolan added, “With coal prices currently in regions not seen in a decade or more, there is ample motivation to increase production anywhere and everywhere. Clearly, this is good news for dry bulk shipping moving into winter as coal is often stockpiled in advance and the motivation for such inventory building should be great given the risk of [natural] gas shortages.

“This should lead to some very interesting months starting in September, given how tight the dry bulk shipping market already is currently.”

Decarbonization and Chinese imports

One irony of the current market is that weather events ascribed to global warming are stoking demand for transport of out-of-favor coal. A second irony is that the decarbonization push in China could increase coal-shipping demand even more. 

During last month’s Marine Money Week virtual conference, Magnus Halvorsen, CEO of Norway-listed 2020 Bulkers, explained, “China consumes around 4 billion tons of coal [a year] and imports shy of 300 [million tons], so any change in the import ratio to consumption will have a dramatic impact on import requirements. If China, as part of an environmental crackdown on its domestic production, produces significantly less coal, it’s going to have a strong impact on import requirements.”

According to Aristides Pittas, CEO of EuroDry (NASDAQ: EDRY), “China, for environmental reasons, is going to limit the use of its own coal mines. So, the better-quality coal [from outside China] will benefit, and that will benefit the shipping market.

“We all know coal is a dirty cargo and one that will become obsolete at some point in time,” said Pittas during the Marine Money Week event. “We are all in favor of that. We want a clean world and we want to help. But it doesn’t happen overnight. It doesn’t happen that quickly. And the road to decarbonization will create a lot of inefficiencies. Inefficiencies are usually things that help shipping markets.

“I think coal will surprise people,” said Pittas. “It’s not disappearing yet, so watch out.”

Tyler Durden Fri, 07/30/2021 - 14:28
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