China’s demand for refined nickel has reached its lowest levels in nearly two decades, reflecting a significant shift in the country’s industrial landscape.
Stainless steel mills in China now favor nickel pig iron (NPI), an intermediate form of the metal that gained prominence during the nickel price surge in 2007, with Indonesia emerging as the largest supplier.
Furthermore, China’s burgeoning electric vehicle battery sector has reduced its reliance on high-purity Class I refined metal. Instead, the sector is increasingly importing various intermediate nickel products, predominantly sourced from Indonesia.
This changing dynamic between China and Indonesia is transforming the global nickel market, as Indonesia ramps up the production of Class II products such as NPI and ferronickel, allowing China to detach itself physically from the Class I refined metal market.
The declining import demand for refined nickel in China mirrors the broader supply trends in the nickel market, raising questions about how to price the metal across its diverse forms.
In April, China’s imports of Class I refined nickel stood at a mere 3,204 tonnes, marking the lowest monthly total since January 2004. Imports during the first four months of 2023 reached 23,453 tonnes, a staggering 65% drop compared to the same period last year.
Notably, China’s appetite for this type of nickel peaked in 2016 at 371,000 tonnes, mainly fueled by a surge in Russian imports after Norilsk Nickel was included as a deliverable brand on the Shanghai Futures Exchange (ShFE).
Since Russia’s invasion of Ukraine in February of the previous year, there has been no repetition of this surge in Russian nickel imports. While China has continued to absorb excess Russian aluminum, imports of Russian nickel have plummeted by 57% in January-April, amounting to just 5,000 tonnes.
Additionally, China exported 12,400 tonnes of refined nickel in the first four months of the current year, with Singapore receiving 3,600 tonnes and India and the Netherlands each receiving 2,000 tonnes. These export numbers encompass both outright exports and the shipment of untaxed metal stored in bonded warehouses.
It is plausible that this year’s outbound flows were primarily warehouse turn-around trades. Regardless, China’s net demand for refined nickel from the rest of the world amounted to a mere 11,000 tonnes during the first four months of this year, a significant decline from 61,000 tonnes in January-April 2022.
The decline in imports can be attributed, in part, to the intensifying competition for Class I metal worldwide. Despite this, Class I metal remains the preferred material for the production of battery-grade sulfate for those not engaged in the Indonesian nickel boom.
The declining demand for refined metal is evident in the dwindling stocks at the London Metal Exchange (LME), which currently stand at 38,916 tonnes, the lowest level since 2006.
China’s transition towards Indonesia’s supply of Class II intermediate nickel products is accelerating. In April, China imported a record-breaking 628,000 tonnes of Indonesian NPI, bringing cumulative imports for the first four months of the year to 2.0 million tonnes, a 46% increase from the previous year.
Furthermore, imports of intermediate products like nickel oxide and mixed hydroxide precipitate exceeded 55,000 tonnes in 2021. Monthly flows have consistently surpassed this level since February, and cumulative imports during January-April 2023 amounted to 236,000 tonnes, triple the figure from the same period last year.
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