With the advent of high-nickel batteries, how long can nickel prices remain calm?

"The trend of high nickel is coming, and the price has hit a new high..." A year ago, in 2018, which was hailed as the "first year of mass production of high-nickel 811 cathode material batteries", the nickel price once reached 106,520 yuan/ton. Although there were fluctuations overall, it was generally optimistic and good news came frequently. However, pessimistic expectations have become the main theme of nickel prices in 2019. In April, it has fallen below 100,000 yuan/ton, showing a fluctuating and weak trend.

The development trend of high-nickel batteries is no longer news. BMW X1 plug-in hybrid, GAC Aion S, Geometry A... these new cars have been equipped with CATL 811 batteries. In the second half of this year, NIO ES6, Xiaopeng P7 and other models will also launch 811 models one after another.

There are quite a few power battery companies that have 811 batteries in their plans. In addition to CATL, Tianjin Lishen NCM811 has already supplied small batches. In May last year, BYD was the first to announce the mass production of 3.0Ah cylindrical 18650 battery NCM811. BYD, Guoxuan High-tech, Penghui Energy and others are also ready to go.

In addition to 811, SK Innovation even stated that it will develop "NCM91/21/2" in 2019, that is, the proportion of nickel in the raw materials used as positive electrode materials is 90%, and cobalt and manganese each account for 5%.

The nickel metal in power batteries is used in the form of nickel sulfate, NiSO4·6H2O. Therefore, nickel and nickel sulfate need to be treated differently. The uses of the two are different. Two-thirds of the world's primary nickel ore is used in the production of stainless steel, while nickel sulfate is mainly used in electroplating and batteries (battery-grade nickel sulfate accounts for 80%).

Relevant institutions predict that the nickel consumption of China's new energy vehicle industry will be 10,000 tons in 2018, accounting for 0.5%, which will increase to 38,000 tons by 2020 and reach 137,000 tons in 2025. The industry generally believes that the growth trend of nickel sulfate utilization will drive nickel prices to continue to rise in the future.

Nickel prices fluctuate, and the driving force of 811 is temporarily weak

The recovery of nickel prices began in 2016. Since then, global nickel ore production has entered a cycle of increased production. Looking back at 2018, the strong development momentum of the new energy vehicle market in the first half of the year made the supply side not calm enough, and the substantial expansion of nickel sulfate production capacity caused nickel prices to fall. At the beginning of the second half of the year, with the entry of domestic environmental protection inspection teams into relevant provinces and cities, nickel iron production declined, and the increase in steel mill costs caused nickel prices to rise. In the fourth quarter, factors such as Sino-US trade frictions and declining market demand led to another decline in nickel prices.

In March 2019, the nickel price was strongly pulled up to 103,233.33 yuan/ton. However, after that, a series of shocks made the nickel price curve fluctuate and show a weak trend. It was not until late June that the price point of 100,000 yuan/ton was touched again. The price was weak and the trend was gradually under pressure.

The price difference between nickel sulfate and nickel metal is relatively large. Taking June 12, 2019 as an example, the price of nickel metal was 98,800 yuan/ton, while the price range of nickel sulfate was 24,000 yuan/ton-26,000 yuan/ton.

There are many reasons for the fluctuation of nickel prices, including the global economic situation, upstream environment, and supply and demand. In April this year, Al Remiti, chairman of the Market Research Committee of the World Steel Association, said that global steel demand is expected to continue to grow in 2019 and 2020, but the growth rate will decline as the global economy slows down. In his view, the development of the trade environment and financial markets is very unstable.

In addition, upstream areas have also suffered setbacks. Since March this year, Jayapura, the capital of Indonesia's Papua Province, Sumatra Island, and Sulawesi Island have been hit by floods one after another. Although there is no data yet on the impact of this natural disaster on mining industries such as nickel ore, the losses in bridges, roads, hydropower facilities, etc. are bound to affect most industries, including the steel industry.

Nickel is destined to be unstable in 2019. Although nickel sulfate production can be achieved domestically, domestic nickel ore is mainly imported, and the total imports from Indonesia and the Philippines account for more than 95% of the total domestic nickel ore. From January to October 2018, China imported 40.172 million tons of nickel ore, of which 12.25 million tons were imported from Indonesia and 26.263 million tons were imported from the Philippines.

Excessive reliance on imports will inevitably be affected by the international situation and the upstream environment. Nickel ore in the Philippines is of medium and low grade, and the government's environmental protection requirements for domestic mines are becoming increasingly stringent, resulting in a decrease in production this year. Nickel ore in Indonesia is of high grade, and further liberalization of exports will have a significant impact on the former, and the import environment is volatile.

However, the demand side is expected to keep the nickel price at a relatively good level. The demand from the stainless steel industry is still the main force, and the demand for nickel sulfate in the power battery industry will continue to increase. According to data from Gaogong Industry Research Institute (GGII), my country produced about 111,000 new energy vehicles in May 2019, a year-on-year increase of 29% and a month-on-month increase of 4%; the total installed capacity of power batteries was about 5.68GWh, a year-on-year increase of 26% and a month-on-month increase of 5%.

At present, the driving force of the power battery industry on nickel prices is relatively weak, and the demand side is still in its infancy. The traditional logic of stainless steel will still determine the fluctuation range of nickel prices. In a nutshell, the growth rate of upstream supply is limited, and the demand for stainless steel and power batteries in the downstream is growing steadily.

In this regard, Mo Ke, chief analyst of Zhenli Research, told the reporter of Automotive Business Review: "The development of 811 batteries is still in its infancy and has little impact on nickel prices. However, as they become more popular in the future, they will gradually drive up nickel prices."

In 2019, nickel metal will continue to destock, and the rapidly growing demand for nickel sulfate will quickly absorb the existing and expanded production capacity.

Nickel sulfate, the core of ternary lithium battery

According to the data on the application side of nickel sulfate, China's nickel sulfate production capacity was 440,000 tons in 2017, and its output was 326,000 tons, a year-on-year increase of 60%. In 2018, China's nickel sulfate output was between 430,000 tons and 500,000 tons, a year-on-year increase of about 38%, and the global output will reach about 700,000 tons. It is expected that the global nickel sulfate production capacity will expand to more than 1 million tons in 2020, an increase of 40% over 2018.

The reason is that in addition to the rapid growth in demand for ternary lithium batteries, high-nickel batteries have also contributed greatly. The demand for nickel sulfate per ton of the four ternary lithium batteries, NCM111, NCM523, NCM522, and NCM811, is 0.81 tons, 1.36 tons, 1.61 tons, and 2.15 tons, respectively. Battery-grade nickel sulfate is the source of nickel metal in ternary materials, and such an increase is obviously very considerable. SMM (Shanghai Nonferrous Network) predicts that by 2020, the consumption of new energy nickel sulfate is expected to reach 132,000 tons to 150,000 tons.

The preparation of nickel sulfate from metallic nickel is currently one of the most important ways to produce nickel sulfate. Other methods include "the impurity nickel contained in copper electrolysis dissolves in the anode to form nickel sulfate", "nickel intermediates such as nickel oxide, nickel hydroxide and nickel carbonate are dissolved in sulfuric acid", "nickel-containing solution in cobalt production" and "prepared from nickel-containing waste materials". In addition, China has increased the amount of imported nickel sulfide ore from Australia, Russia, Guatemala and New Caledonia, and the former is also used to produce nickel sulfate.

From a global perspective, the domestic output of nickel sulfate is slightly higher than that of foreign countries, accounting for about 60%. According to SMM research data, the final value of the national nickel sulfate output in April 2018 was 38,250 physical tons, of which Guangdong, Jiangsu and Shandong produced a total of 8,950 tons, accounting for 23% of the national share. However, the production of nickel sulfate faces many obstacles, and the expansion of production capacity is not so smooth. Because it is included in the list of hazardous chemicals, the 2-3 years of safety and environmental assessments are a headache for many companies.

In terms of inventory, LME (London Metal Exchange) nickel inventory dropped from 367,000 tons to 206,000 tons from the end of 2017 to the end of 2018, and domestic Shanghai Futures Exchange inventory dropped from 44,200 tons to 15,300 tons during the same period. According to data from INSG (International Nickel Study Group), in 2018, global primary nickel production was 2.18 million tons, consumption was 2.33 million tons, and the supply-demand gap was 145,000 tons.

Nickel prices are still volatile, and the ability of high-nickel batteries to increase prices is temporarily limited, but the potential is unlimited. In the long run, the demand side may face continuous new structural adjustments.