Categories:
Base Metals
/
General Market Commentary
Topics:
General Base Metals
/
General Market Commentary
Doubts cast on plans for deluge of new nickel supply
LONDON (Reuters) - Expectations of a supply avalanche hitting the nickel market next year due to new capacity in Indonesia have sent prices to seven-month lows, but analysts doubt the plans spearheaded by Chinese firms can be carried out so quickly.
Benchmark nickel on the London Metal Exchange nearing $11,000 a tonne is down more than 15 percent since late September, partly due to the U.S.-China trade dispute undermining demand for the metal used in stainless steel.
Graphic: Nickel price
Nickel is also vital for the lithium-ion batteries used to power electric vehicles, where demand is set to accelerate exponentially over coming years.
Graphic: Nickel demand growth
This is why companies in China, which dominates electric vehicle battery production, need to secure nickel supplies.
That includes GEM, which recently announced it was teaming up with Contemporary Amperex Technology (CATL) and Tsingshan Holding Group to invest $700 million in an Indonesian project to produce battery-grade nickel chemicals.
Also involved is Japanese trading house Hanwa, which in a release said production would start in 2019.
The consortium aims to establish a 50,000-tonne high-pressure acid leach (HPAL) facility at Tsingshan’s industrial park in Morowali, on the Indonesian island of Sulawesi, to produce nickel and cobalt chemicals.
“There is panic about supply, but the Tsingshan project isn’t going to hit the market next year. It will take two to three years,” said Jim Lennon, managing director of Red Door Research.
GEM, CATL and Tsingshan did not respond to requests for comment.
A source at one of the Chinese partners said construction may start at the end of 2019 after a site had been selected and the equipment ordered and delivered, but that the date may be pushed back to 2020.
“What also spooked everybody was that they said it was going to cost $700 million,” Lennon said.
“Pretty much every HPAL project has taken longer and cost more than was originally announced.”