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LME Nickel Stocks

lse:amc

#1

LME nickel supply /demand dynamic seems to be following a consistent pattern for 2018 so far.

If this continues then 240k tonnes in the LME by the end of August and 180k tonnes by the end of 2018. We are on for approximately 200k reduction in LME nickel stocks over the whole of 2018. It’s anybody’s guess as to what 2019 has in store!

TDT :sunglasses:


#2

Hi TDT

You have put some good posts on here. Has someone got you barred from LSE?


#3

There is some very good information in this RNC investor presentation from 23rd. August 2018. Well worth a good 30 minutes to go through what they are saying to their investors.

What’s of particular interest is the roasting process they plan to use and the “highest-grade nickel and cobalt sulphide concentrate in the world” comment that goes with it. Something for Amur to consider perhaps!

TDT :sunglasses:


#4

It’s interesting that the last time nickel stocks in the LME were around the levels we have today the price of nickel was comprable to what we are seeing now.

Back in 2013 stocks were, of course, going in a different direction. The average in the LME for the months of November 2013 was 244,581 tonnes at a price of $13,729/tonne or $6.23/lb. which isn’t far off today’s price.

At current depletion rates nickel in the the LME should drop to around 180,000 tonnes by the end of this year. If it does and the correlation holds we should see nickel at $6.47 to $6.78/lb.

It really starts to get interesting once stocks drop even further.

TDT :sunglasses:


#5

I hear what you’re saying, but back then there was no EV battery demand on nickel stock, we are going to see something different imv.


#6

I try to avoid opinions. The evidence and the facts tend to be more reliable.

As for the demand for nickel for EV batteries that demanad is still relatively small. Even if it grows exponentially there is still an awful lot of class 1 nickel used to make stainless steel. Norilsk picked up on this point in their latest investor presentation.

This probably helps explain why the Chinese have been building a load of NPI plants in Indonesia these past few years.

The potential to produce nickel sulphate from all forms of nickel is a potential cap on the nickel price until the EV revolution really does take off.

The issue here is not if but when.

TDT :sunglasses:


#7

First increase in LME nickel stocks since 12th. July, up by 12 tonnes, on the same day the price of nickel falls off a cliff, down by almost 20¢/lb.

Time to re-read Andy Home’s piece from 15th. August.

Especially this bit:-

The problem is that if the escalating trade tensions do start impacting global growth, one of the casualties is very likely going to be the stainless steel industry.

And that could still mean trouble for the nickel market.

Nickel may well be dancing to a new beat but it may find breaking up with its traditional stainless partner hard to do.

If nickel decides to re-couple with stainless steel we could be in for a hefty fall. The emrgence of EVs to soak up any excess nickel as a result of the demand for stainless steel falling is unlikely to be big enough or soon enough to prevent the price of nickel from retracing.

You need to keep your eye on the long game.

TDT :sunglasses:


#8

That was short lived. It seems yesterday’s modest increase in LME stocks was a bit of an anomaly since we appear to be back on track today. Nickel in the LME down by 1,896 tonnes in 24 hours. That’s the largest 24 hour drop since early June. Of equal interest is the fact that nearly all of that comes from a reduction in canceled warrants which means its nickel being taken out of the LME.

It will be interesting to see what affect, if any, this will have on the nickel price come Monday.

TDT :sunglasses:


#9

It’s always a good idea to keep on top of what the major players are saying in the nickel market, Vale in particular.

http://www.vale.com/EN/investors/information-market/Press-Releases/ReleaseDocuments/Vale_IFRS_2Q18%20i_vf.pdf

"Global stainless-steel production increased 8.6% in 2Q18 relative to 2Q17, while electric vehicles [EVs] sales worldwide grew 69% in 2Q18 relative to 2Q17. Demand for nickel in other applications continues to be positive, particularly in the super-alloy and plating sectors. Supply increased by approximately 6% in 2Q18 relative to 2Q17. This growth was mainly in Class II [NPI] material (+9% YoY), with Class I material increasing slightly (+1.5% YoY). The near-term outlook for nickel remains challenging, as Indonesian ore exports effectively remove any ore availability issues for Chinese domestic NPI production. Chinese production was impacted by environmental policy enforcement as well as capacity limitations. In addition, Indonesian domestic NPI production will continue growing as operations ramp up, but this is increasingly integrated into Indonesian stainless steel production, thus leading to a potential decrease in NPI exports. On the demand side, stainless is projected to continue growing, while demand for batteries in EVs will grow at an accelerated pace. Overall the market is expected to reflect a larger deficit in 2018 than in 2017. Despite this deficit, prices tend to be volatile as macroeconomic factors, such as the ongoing trade dispute between major powers, introduce risks to the market, while significant inventories act as a buffer to price recovery. The long-term outlook for nickel continues to be positive. Nickel in electric vehicle batteries will become an increasingly important source of demand growth particularly as battery chemistry favors higher nickel content due to lower cost and higher energy density. Capital investment for new projects and replacement volumes have been deferred within the context of challenging economic conditions. Capital is starting to flow back into the industry given the recovery in price. However, the timing of investments means production increase will lag and this will widen future deficits given continued demand growth."

The last sentence in bold my emphasis.

Or even Wood MacKenzie

I expect $9/lb by mid 2019 if past experience is anything to go by (assumes LME stocks down to under 100,000 tonnes). Wood MacKenzie predict $13/lb by 2022. Aybody’s guess as to what LME stocks will be for nickel to reach £13/lb.

Will Amur be sold for upwards of $600m before any of this transpires? I fecking hope so.

TDT :sunglasses:


#10

It may be a bit premature signalling the end of the rapid draw down but the worsening economic climate has to impact at some point. It looks like Andy Homes prediction was on the money.

“The problem is that if the escalating trade tensions do start impacting global growth, one of the casualties is very likely going to be the stainless steel industry. And that could still mean trouble for the nickel market. Nickel may well be dancing to a new beat but it may find breaking up with its traditional stainless partner hard to do.”

Time to keep a closer eye on the stainless steel market.

TDT :sunglasses:

PS The above looks like it might have been either a little bit too pessimistic or premature. LME nickel stocks fell by 510 tonnes yesterday and it looks like they’re down another 954 tonnes today.

PPS Stocks dropped by aother 324 tonnes today (06/09/2018) leaving 236,706 tonnes of class 1 nickel in the LME.


#11

LME stocks down by another 456 tonnes today leaving 236,250 tonnes of class 1 nickel in the exchange. The rate of decline over the first week of September has slowed noticably with 2,532 tones leaving the LME during that period. If that’s repeated over the remaining three weeks of the month the draw-down will be in the region of 10,000 tonnes and not the 15,000 to 16,000 we have seen over the first 8 months of the year.

We have had slow weeks before only for subsequent weeks to make up for it. The end of the month will give a more accurate picture.

TDT


#12

Three web sites reported nickel stocks in the LME falling by 816 tonnes yesterday


yet the LME has stocks rising by 816 tonnes. I guess somebody assumed a fall. The LME must be correct. Stock currently stands at 237,066 tonnes.

TDT :sunglasses:


#13

This web site is still incorrectly showing -816 tonnes leaving the LME on the 10th. which makes the -726 tonne figure for today a bit suspect. Best to wait until the offical LME figures are published tomorrow.

Interesting to note that the LME canceled warrant figure dropped by 876 tonnes the other day while live warrants increased by 1,692. Nickel is still leaving the LME at a healthy rate.

TDT :sunglasses:

PS One further thought. I wonder if the upsurge in nickel entering the LME is down to class 1 nickel normally used to make stainless steel being freed up.


#14

The net deficit for August was 15,768 tonnes which is slightly down on July’s deficit of 17,544 tonnes.

It will be interesting to see the final figure for September and whether the slow down in the drawn down continues. With luck the LME will at least be south of the 200,000 tonne mark the end of 2018.

TDT :sunglasses:


#15

Perhaps predicted battery nickel shortage will be delayed by hybrids


#16

I think developments in the stainless steel industry are likely to have far bigger effects. If demand for SS falters it frees up class 1 nickel. That’s likely to have a bigger impact on nickel than hybrids.

TDT :sunglasses:


#17

Indeed there is now a great uproar in this commodity.
Recently the Societe General, in its Asian Unit (Olivier Godin), has a more bullish position for nickel.
There are reports for all tastes, an undeniable fact is the fall in inventories (LME and Shanghai) that are due to storage in the “Giga Factories”, storage aimed at price protection, as is speculation about this asset.
Wood Mackenzie is much more optimistic about prices, but I do not forget that the same house in 2014 made a big mistake in its price predictions, however, he said in the same report for the growing deficits.
Bernstein has a vision close to Wood Mac. Of course, what matters here is the average forecast of several analysts, and it is arround 15.000/16.000 at 2020
Of all the studies that I have done, the current price level is not great for encouraging mining that is weakened with the prices of the past. An exaggerated price increase will make manufacturers find alternatives to Nickel, the risk of a technological evolution that puts batteries with no nickel or cobalt is real.
Not to mention the risk of a “total trade war”, or a slowing of world growth


#18

Nuno

Some interesting observations/comments there. I’d like to pick up on a couple if I may.

“Of all the studies that I have done, the current price level is not great for encouraging mining….”

Very true but if it were higher what would they mine? Laterites are one thing, abundant but costly to process, sulphides are much rarer. Even if prices were considerably higher what projects are there that are ready to go, the cupboard is virtually bare. Low grade high volume nickel sulphide projects like Dumont, Turnagain, Taalvivara need not just higher prices but consistently higher prices. Nickel’s average price over the last 30 or so years is around $6/lb. It would need to get up above and stay consistently above this level to make these projects viable.

“An exaggerated price increase will make manufacturers find alternatives to Nickel……”

If the price of nickel goes above $8/lb it makes it financially attractive to produce nickel sulphide (NiSO4) from laterites.

The above link is taken from Norilsk’s 2nd. Q 2018 investor presentation. They also suggested that class 1 nickel currently used in the stainless steel industry could be swapped for NPI. I don’t think we will be seeing a supply side crunch for some time.

You also need to take on board the length of time it takes to develop, test and get approval for new technologies, especially in the automotive industry. We see numerous articles in the press on different battery chemistries almost on a daily basis. None are ready to be rolled out on a commercial scale though. A new, nickel free, battery needs to be both cheaper and better than the current offering(s). That’s a big ask at the moment.

“Not to mention the risk of a “total trade war”, or a slowing of world growth”

A trade war is the biggest problem for nickel at the moment but I’m expecting the American people to neuter Trump at the forthcoming mid-terms. If the Democrats take control of Congress that should help cap Trump’s more destructive and irrational impulses.

As for all these different predictions from the industry experts I take it all with a pinch of salt. The only thing I do know is Amur Minerals, with the grade and size of resource they have, is sitting on a potential gold mine. This one simply requires patience.

TDT :sunglasses:


#19

This article merely confirms what we already know.

This is an industry publication which has limitted circulation. When the mainstream press starts highlighting the issue as well then you start to get real traction.

The remaining months of this year will be interesting. If we top 2m new EVs globally then the scene will have been set for explosive growth in the uptake of EV’s over the next 5 to 6 years. Current predictions will be seen for what they are, hopelessly conservative.

If recent reductions in nickel stocks in the LME are anything to go by battery manufacturers agree. On 13th. September 1,848 tonnes of nickel left the exchange on 14th. September 396 tonnes. That leaves 233,592 tonnes in the exchange which is the lowest since 24th. October 2013.

TDT :sunglasses:


#20

This article is worth reading:-

"Nickel producers eye Indonesia to plug into EV battery market"

This bit in particular.

“That could change if producers are willing to plough investments into high pressure acid leach (HPAL) plants. The plants, which use heat and pressure to remove the nickel and cobalt from the ore, are regarded as technically challenging and expensive but produce high quality metal.”

If you have any knowledge of the history of HPAL you will know that it is a fiercely expensive option which takes an inordinate amount of time to both build, commission and bring up to nameplate. In fact a majority of the HPAL projects built and commissioned over the last 20 years have still to hit nameplate. Ambatovy, Goro, Ramu, Ravensthorpe have all either failed to hit or maintain nameplate.

If companies are considering going down the HPAL route, with all of its technical problems, time issues and costs what does that say about Kun Manie?

TDT :sunglasses: